ACCA updates tax report as debates about company taxation remain highly controversial in an increasingly digitalised economy

The principles and practices of taxation of companies explained in reboot to 2014’s initial guidance

Given the changes in the global economy in the last five years, ACCA today updates its report Global policy on taxation of companies: principles and practices – reiterating that in a globalised business environment, it’s undesirable and potentially counterproductive for any one country to go its own way, changing its tax laws unilaterally.

The report was originally published in 2014, to offer broad views about the issues being discussed around global taxation, with the aim of bringing structure and consistency to the debate.

Covering company taxation, rather than personal tax, this report also looks further ahead to how the tax landscape might unfold in the future. It also identifies features of a ‘good’ tax system and frames principles that ACCA aims to follow in its approach to policy on corporate tax matters.

Jason Piper, Policy lead, Tax and Business Law at ACCA says: ‘Our updated paper revisits the context within which the policy sits, as the global economy has moved on, but reiterates our policy positions, which we believe have stood the test of time.

‘As we approach 2020, we believe that coordinated efforts should be made internationally to ensure that tax systems keep pace with changes in the way that business is conducted, capturing the substance of economic activity in the calculation of liability to tax. ACCA supports and is directly involved in the efforts being made at G20 / OECD level to achieve this global reform.’

ACCA offers recommendations for companies, policymakers and those working as tax advisers, including:

For the company or corporate decision maker
ACCA believes companies should not, in principle, pursue aggressive tax avoidance - which means completely artificial arrangements that have no clear purpose other than to avoid tax by complicated schemes.

Companies have a commercial imperative, but ACCA believes that they also have a wider responsibility to be good corporate citizens. Companies need to consider the wider impacts of their tax policies and recognise that some approaches to tax will be seen by some people as unethical even if they are legal.

For the professional accountant – as adviser or employee
Professional accountants have a duty to advise their clients and employers on all options for maximising profits and prospects – this duty invariably recognises that taxpayers have no obligation to pay tax beyond the requirements of the law.

Accountants also have a clear duty to advise on the risks and the ethical dimension, including technical and reputational issues, associated with all available options. Not to do so could lead to the possibility of committing professional misconduct.

For the policy maker
Tax laws in many jurisdictions were constructed for a different era of business. ACCA calls for clearer and simpler tax laws reducing uncertainty.

Taxpayers’ rights must be recognised and a balance of interests preserved. In light of this, ACCA suggests that a different approach may be required for the taxation of companies – including considering whether corporate tax itself is workable at all in the new global environment, and therefore whether other forms of taxation of corporates need to be developed.

For the profession
ACCA believes that IESBA should review its standards to consider ethical issues around tax avoidance and, if necessary, clarify its guidance and standards.

Bodies such as the International Federation of Accountants (IFAC) and other representative bodies of the accountancy profession should continue to engage in the public debate and acknowledge the role of the profession in responsible behaviours and practices.

Jason Piper concludes: ‘While debates will continue about taxation, the heart of the matter is whether tax laws, especially for corporates, reflect the new business models of the 21st century and consumers’ wider ethical expectations.

‘The accountancy profession is and should be part of the solution. Professional accountants need to continue their work with policymakers to develop approaches that work for business and allow companies to be competitive and profitable, while also meeting wider considerations of social responsibility.’

The report can be found online here https://www.accaglobal.com/gb/en/professional-insights/global-profession/Global_Policy_on_Taxation_2019.html alongside other tax-related reports such as Tax as a force for good.

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About ACCA

ACCA (the Association of Chartered Certified Accountants) is the global body for professional accountants, offering business-relevant, first-choice qualifications to people of application, ability and ambition around the world who seek a rewarding career in accountancy, finance and management.

ACCA supports its 219,000 members and 527,000 students (including affiliates) in 179 countries, helping them to develop successful careers in accounting and business, with the skills required by employers. ACCA works through a network of 110 offices and centres and 7,571 Approved Employers worldwide, and 328 approved learning providers who provide high standards of learning and development.

Through its public interest remit, ACCA promotes appropriate regulation of accounting and conducts relevant research to ensure accountancy continues to grow in reputation and influence.

ACCA has introduced major innovations to its flagship qualification to ensure its members and future members continue to be the most valued, up to date and sought-after accountancy professionals globally.

Founded in 1904, ACCA has consistently held unique core values: opportunity, diversity, innovation, integrity and accountability. More information is here: www.accaglobal.com

 

"Our updated paper revisits the context within which the policy sits, as the global economy has moved on, but reiterates our policy positions, which we believe have stood the test of time. As we approach 2020, we believe that coordinated efforts should be made internationally to ensure that tax systems keep pace with changes in the way that business is conducted, capturing the substance of economic activity in the calculation of liability to tax. ACCA supports and is directly involved in the efforts being made at G20 / OECD level to achieve this global reform. "

Jason Piper, policy lead, tax and business law - ACCA