- PricewaterhouseCoopers predicted that the use of tax havens to avoid tax will soon become “unacceptable.”
- The accounting firm said 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 — Accountancy firm PricewaterhouseCoopers (PwC) predicted the use of tax havens by companies and individuals to avoid paying tax will soon become “unacceptable,” a week before the release of the so-called Paradise Papers detailing the off-shore financial structures of the global ultra-rich.
In a report released on October 30, 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.”
On Sunday, a leak of documents from off-shore law firm Appleby revealed how individuals and companies use tax-havens and complex structures to legally protect their wealth from tax.
The so-called Paradise Papers showed how about £10 million of the Queen’s wealth was invested off-shore. They also detailed how President Donald Trump’s trade chief, Wilbur Ross, has a stake in a company that does business with a gas producer partly-owned by Vladimir Putin’s son-in-law.
The news comes 18 months after the release of the so-called “Panama Papers” breach, in which 11.5 million documents were leaked from law firm Mossack Fonseca. The leak led to a series of high-profile scandals, including the resignation of the Prime Minister of Iceland after it was alleged he had hidden millions of dollars-worth of investments in an offshore shell company.
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.
The 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.