The CBI has given a lot of thought to what responsible tax means for business, so Action Aid’s recent contribution to the debate on responsible tax practices by companies is timely and welcome.
It turns out the CBI is not alone in its thinking. The report uncovers that there are 45 different types of principles or frameworks that encourage multinational companies (MNCs) to practice responsible tax behaviours. These are from a whole host of players, not just business groups such as the CBI with its Statement of Tax Principles but MNCs themselves; NGOs; investor groups; and tax advisers to name a few.
The report confirms that the majority of the stakeholders have focussed on tax planning practices and tax transparency; however there is little consensus on where to draw the line on what is acceptable or not acceptable tax practices. This is not surprising since this is a subjective question and Action Aid rightly identifies that attempts to define what is acceptable or not acceptable has created a “heated and polarised debate” for which there is ultimately no universal right answer. We couldn’t agree more, and feel the polarisation doesn’t do justice to the positive behaviours that businesses adopt to ensure their tax practices are responsible.
Amongst other things the report raises some important practical points which would benefit from further constructive discussion — around the use of tax incentives, how business engages in the development of effective tax legislation, relationships with tax authorities, and the importance of being consistent in whichever country a business is operating.
The CBI’s Statement of Tax Principles are approaching their 2 year anniversary so we have been discussing with businesses how they are living the principles in practice and how they help make responsible tax a reality. We will share more on our findings in a few months’ time.
Rob Fontana-Reval is Head of Tax & Fiscal Policy at the CBI.