- PricewaterhouseCoopers has predicted the use of tax havens to avoid tax will soon become “unacceptable.”
- A new report says companies will need to put more effort into tax transparency, and trust in this area will be increasingly important for a business’ “brand.”
- There is a growing demand for companies to be paying what is deemed their “fair share,” the report said.
LONDON — “Big Four” accountancy firm PricewaterhouseCoopers (PwC) has predicted the use of tax havens by companies and individuals to avoid paying tax will soon become “unacceptable.”
In an Asset & Wealth Management report released on Monday, PwC said the public was increasingly hostile towards those perceived to be not paying their “fair share” of tax, and that businesses would need to put more effort into tax transparency in future.
“In an era of mistrust of financial services, especially among the millennial generation, tax will become important for the brand,” the report said.
“Being viewed as not paying a fair share of tax or using questionable tax havens will be unacceptable.”
One of the services PwC offers to businesses is tax planning, which includes advising companies on ways they can legally reduce the amount of tax they are required to pay. In 2015, the Public Accounts Committee accused PwC of promoting tax avoidance “on an industrial scale.”
In recent years the UK tax collector, HMRC, has come under pressure to crack down on tax evasion — which is illegal, whereas avoidance is not — and increase tax receipts. A series of new tax and transparency laws came into force this year, including the new criminal offence of failing to prevent tax evasion.
Monday’s report said tax systems around the world were “broken,” but that an era of greater transparency was beginning. It pointed to the Common Reporting Standard (CRS), in which over 50 countries, including several offshore financial centres, have agreed to share information on residents’ assets and incomes. The CRS, it said, “effectively outsources responsibility for reporting on tax affairs to financial institutions.”
The public, it said, will be able to judge whether companies are paying what is deemed fair, in the context of “an emotionally charged environment” and as “strong populist sentiment continues.”
As such, it said, tax will increasingly become an “important operational business risk,” and it will have to play a greater role “in the heart of business.” Technological developments, the report said, will make accurate tax planning as well as transparency easier.
The report also predicted the value of assets under management would rise to $US145.4 trillion by 2025, but said fewer firms would be managing far more assets. It said assets and wealth managers would also increasingly fill “financing gaps,” such as in peer-to-peer lending and infrastructure, and said firms needed to keep up to date with future technological developments.
Commenting on PwC’s tax planning business, a spokesperson said: “We continue to take our responsibility to building to trust in the tax system, and our obligations to clients, governments and other stakeholders, extremely seriously. The advice we provide is given in accordance with all applicable laws, rules, and regulations, including proper disclosure to tax authorities, and adheres to the highest professional standards.”