The paper considers the increasing role of financial reporting in response to calls for increased transparency about the tax affairs of multinational entities.

Authors:

• Lynne Oats, Tax Administration Research Centre, University of Exeter
• Penelope Tuck, Birmingham Business School, University of Birmingham

Abstract

Recent controversies around multinational tax structures and planning activities have led to calls for greater transparency. There is a sentiment that with greater transparency financial scandals could either be reduced in number or more unlikely would not happen. However, there is room for debate about what is meant by tax transparency, and indeed the concept of transparency in general. In this paper we examine two responses to calls for increased transparency about the tax affairs of multinational entities: firstly, country by country reporting that provides information to tax authorities, and secondly the publication of tax strategies, whereby large corporates put information into the public domain. Both of these regulatory initiatives seek to combat ‘tax avoidance’ by large businesses. We find considerable misunderstanding about the benefits of transparency in this setting, and a lack of due consideration for the possible unintended consequences of the provision of more information about large business’ tax affairs.