Companies 'are scrambling to boost tax transparency amid global crackdown'
Companies around the world are scrambling to overhaul how they communicate with the public when it comes to how much tax they pay, according to professional services firm KPMG.
While the Senate is currently investigating multinational firms such as Apple and Google over potential tax avoidance, other countries are also grappling with how to increase the public's perception of fairness in their respective taxation systems.
Greg Wiebe, head of global tax for KPMG, told SmartCompany large corporations are currently responding to the global push to boost transparency and crack down on profit shifting.
"Societal pressures will create a situation where five years from now multinational corporations will be making some sort of declaration to the public in their public statements about here's where we operate, here's what our supply chain looks like, here's the employment we have and the capital we've employed," Wiebe predicts.
"Frankly, our clients are getting ready to tell that story today."
Wiebe says the international tax debate is a way for governments to claw back trust by forcing companies to be just as transparent with their tax as individuals.
Australia, he says, is no exception.
"Ever since the global financial crisis and the great recession that followed, there has been a huge amount of mistrust in government," Wiebe says.
"How do you get that trust back? You do two things – you increase transparency and you focus on the perception of fairness. That's what you see in the whole taxation debate right now."
The OECD released its final report into base erosion and profit-shifting last week, recommending, among other things, mandatory disclosure rules for perceived "aggressive or abusive" tax planning.
The Senate is yet to hand down its final report on corporate tax avoidance, but has put forward a draft report that suggests the Australian Tax Office name-and-shame companies who are not paying their fair share of tax.
While Wiebe applauds the OECD's recommendations, he says it would be terrible for different jurisdictions to develop vastly different rules – for example, if one country requires a "roomful" of paperwork and another does not.
"The cost of compliance to corporations will be impossible," Wiebe says.
"If it's something that the taxing authorities or the government from a policy perspective want to see, then let's develop one way of doing it and it'll be costly for multinationals to comply but at least they'll be able to comply in a consistent manner. But we're already seeing that start to break apart a bit."
Jane McCormick, head of tax for KPMG in Europe and Africa, agrees and questions whether "tonnes of confusing data" would actually help the public understand how much tax a business is paying.
"My real concern is that actually none of that is going to be really helpful to civil society," she says.
"It's a shame in a way, I think, if we get lots and lots of these different laws. It will be a much better thing [if it's consistent] because business is getting its head around this and is getting to a situation where they have to explain themselves. They have to explain themselves in a way that is most appropriate for their business."