Should businesses be more open about tax?

A junior finance minister will today tell companies they should reveal more about how they pay their tax. Not an easy idea to pitch...

by Emma Haslett
Last Updated: 02 Mar 2011
After the Guardian revealed last week that Barclays had supposedly paid just £113m of corporation tax on profits of £11.6bn, there was, understandably, a bit of an outcry. But the details got slightly lost in the uproar: that it had offset the corporation tax it paid against losses it made during the recession. Now, exchequer secretary David Gauke wants businesses to reveal more about the tax they pay – which, according to him, would not only make them more accountable, but might avoid protests like the ones we saw last week…

Gauke is making a speech today saying that by being more transparent about the amount of tax they pay, ‘we could have a better-informed debate’ on the subject. According to Gauke, it could be in business’s ‘long-term interests to engage more forthrightly in this discussion (and) be more robust on the essential contribution you are making individually to reduce the deficit’.

It’s arguable that, had the public been better-informed about how Barclays had paid its tax, they would have been less appalled. For example, all businesses can offset tax they pay overseas against UK corporation tax – so if it’s already paying 12.5% on its profits in Ireland, it would then only have to pay 15.5% in the UK to bring it up to our rate of 28%.

Gauke points out that banks might not be entirely comfortable with the idea, but it could be the way things are going. With more and more legislation aimed at encouraging businesses to be more transparent, early adopters of the idea might actually find themselves at a competitive advantage as consumers are attracted to companies that are more open in the way they operate.

Then again, in an industry that has always been quite secretive about its tax affairs, that might be easier said than done.
Finance Misc

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