Tax transparency is becoming the new norm as the OECD, European Commission and national governments demand more data from businesses. However, many companies do not have systems or resources in place to meet new requirements, according to EY’s report, entitled ‘A new mountain to climb: tax reputation risk, growing transparency demands and the importance of data readiness.’ The report is the third instalment of the 2014-15 Tax risk and controversy survey series, which surveyed 962 tax and finance executives in 27 jurisdictions.
Amid increasing scrutiny of business’ tax arrangements by government and other groups, companies are more focused than ever on tax risk and controversy, with 83% reporting that they regularly brief the CEO or CFO about the issue. For many tax professionals normally accustomed to primary focus on meeting legal and regulatory requirements, this heightened scrutiny is a new and unfamiliar challenge.
Notably, 94% of the largest companies interviewed think that global disclosure and transparency requirements will continue to grow in the next two years. Not surprisingly, 71% of all respondents expressing an opinion said that they would need additional resources in order to gather and provide the information required.
Jay Nibbe, EY’s Global Vice Chair of Tax, says: “We are at a critical stage as the global tax environment evolves. Increasing transparency readiness presents an opportunity not only to comply with new disclosure demands but also to proactively work to mitigate reputation risk. Getting prepared will require some additional investment in technology, data extraction capabilities, and new skills in people resources. It also involves increased awareness on how you think about your tax position, and how it could be perceived by a wide range of stakeholders.”