Global policy on taxation of companies: principles and practices

The first Global policy on taxation of companies: principles and practices report was originally published in 2014, to offer broad views about issues being discussed at the time around global taxation, with the aim of bringing structure and consistency to the debate. The principles and practices of taxation of companies are further explained in this reboot to 2014’s guidance. 

Covering company taxation, rather than personal tax, this report also looks further ahead to identify 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.

Our updated paper revisits the context within which the policy sits, as the global economy has moved on, but reiterates ACCA's policy positions, which we believe have stood the test of time. 

As we approach 2020, 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.

Some recommendations for companies, policymakers and those working as tax advisers, include:

For the company or corporate decision maker

Corporate decision makers and companies should not, in principle, pursue aggressive tax avoidance - which means that they should not partake in 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. They 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 doing 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 

We believe 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.

Conclusion

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.