Investors press for lower taxes

/ 26 October 2015

David Whiscombe

‘A survey by Allen & Overy reveals investors are upping the pressure on companies to lower their tax rates, despite the growing assertiveness of tax authorities.

More than three out of four businesses said their investors had increased their influence on their tax strategy over the past five years, according to the poll of 350 senior executives. More respondents said minimising tax liabilities was the most pressing matter for their business compared with five years ago. And two-thirds said the key objective of the tax function in their company was to achieve the lowest effective rate possible. Around 80% of companies also said their approach to tax planning conflicted with what HMRC wanted.

Allen & Overy’s Lydia Challen said setting tax strategies forced companies to consider conflicting factors, including their duty to shareholders and their social responsibility. “Governments may need to start thinking about how to sell the idea of tax ‘fairness’ to investors if they want to see a sea change in corporate tax behaviour,” she said. The survey also highlighted companies’ fears that other countries might follow the UK’s lead by introducing a diverted profits tax. Companies in the retail and consumer goods sectors were most likely to say they would change their tax strategy as a result of developments such as the DPT.

Source: Financial Times, Page: 4

Sometimes we are completely bemused by surveys such as this. “Two thirds [of businesses] said the key objective of the tax function in their company was to achieve the lowest effective rate [of tax] possible”. We would be intrigued to know what the job description of the other third of Tax Directors looks like. Bringing the effective tax rate up to the maximum possible figure? Surely not.

And we wonder how the interviews for recruitment to such a role would go. “Good morning, Mr Jones. I’ll get straight to the point. The Board have serious concerns that the group has not been paying enough tax lately, and we need to do something about it urgently. Could you tell us a little more about your record of avoiding avoiding tax and mitigating the effect of tax mitigation; perhaps you could also cover off some of the tax reliefs we could legitimately fail to claim…”

David Whiscombe


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