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CBI urges business to steer clear of tax abuse

UK BUSINESSES should only engage in reasonable tax planning that is aligned with commercial and economic activity and does not lead to an abusive result, according to the CBI.

The call is chief among a series of principles released by the confederation as businesses seek to wrest back the initiative in the tax transparency debate. Various activism groups have urged the government and the G20 to impose tough rules on multinationals forcing them to report separately on their financial activity for each country in which they operate, with the aim of exposing aggressive tax schemes used by multinationals.

The 14-point document includes methods to enhance co-operation, trust and confidence between HM Revenue & Customs and business; promoting efficient working of the tax system to fund public services and sustainable growth.

Earlier this week, Ernst & Young released its own report on the subject, warning that greater disclosure of the tax affairs of large corporates may not deliver greater understanding to stakeholders.

Indeed, the firm harbours concerns that introducing measures such as country-by-country reporting could result in a potentially significant administrative burden and cause businesses to “divulge commercially sensitive information”.

It did, though, encourage businesses to “seize the initiative” in becoming more open so as to “positively inform and influence the debate”, while failing to “at least consider greater disclosure” would raise concerns.

While the CBI appears less concerned about business’s image, it insisted companies must be clearer about their tax bills.

Director-general John Cridland (pictured) said: “UK businesses make a huge tax contribution to the UK economy, paying £161bn this year – almost a third of total tax receipts. But companies need to do a better job of explaining their tax affairs to the public.

“We are encouraging all companies to explain why they pay what they do in a straight-forward and accessible narrative, ideally on their website.”

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