StockMarketWire.com - The CBI has published a statement of principles outlining how companies should conduct their tax affairs to improve transparency and understanding, which includes using narrative reporting. The CBI strongly recommends that these principles are followed by British businesses and all companies operating in the UK.

John Cridland, CBI Director-General, said:

“UK businesses make a huge tax contribution to the UK economy, paying £161 billion 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.”

The CBI also said it was supporting the important work of the OECD to update some of the international tax rules which have lost pace with globalisation. It also made clear its support for the automatic exchange of information and Beneficial Ownership.

The CBI has published a statement of principles to encourage more responsible tax management, including:

Tax planning principles

1. 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.

2. UK businesses may respond to tax incentives and exemptions.

3. UK businesses should interpret the relevant tax laws in a reasonable way consistent with a relationship of “co-operative compliance” with HMRC.

4. In international matters, UK businesses should follow the terms of the UK’s Double Taxation Treaties and relevant OECD guidelines in dealing with such issues as transfer pricing and establishing taxable presence, and should engage constructively in international dialogue on the review of global tax rules and the need for any changes.

Transparency and reporting principles

Relationships between UK businesses and HMRC should be transparent, constructive and based on mutual trust with the result that HMRC should treat business fairly and with respect, and with an appropriate focus on areas of risk.

5. UK businesses should be open and transparent with HMRC about their tax affairs and provide all relevant information that is necessary for HMRC to review possible tax risks.

6. They should work collaboratively with HMRC to achieve early agreement on disputed issues and certainty on a real-time basis, wherever possible.

7. Firms should seek to increase public understanding in the tax system in order to build public trust in that system, and, to that end:

- They should consider how best to explain more fully to the public their economic contribution and taxes paid in the UK

- This could include an explanation of their policy for tax management, and the governance process which applies to tax decisions, together with some details of the amount and type of taxes paid.

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