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Companies need to prepare for ‘tax crisis’, says PR agency

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Large companies must be prepared to explain why they have chosen to structure their affairs in order to save tax, according to the head of a leading public relations group. James Henderson, chief executive of Pelham Bell Pottinger, said companies should work together to devise a set of ‘acceptable industry guidelines around tax’, but he called on governments to be more transparent about policies that make ‘certain tax structures’ possible.

Henderson said there was a time, not long ago, when ‘society did not pay much attention to how much tax a company paid’.

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In an article titled ‘How to talk about a tax crisis’, published by Ernst & Young, he wrote: ‘That has all changed since what you might call “the tax spring,” when pressure groups and the media started picking up on any examples of perceived tax avoidance. In today’s climate of economic austerity, the public expects everyone to do their bit.’

It would be a mistake for companies to ‘pretend that they don’t have a problem or avoid tackling it in the hope that it will blow over’, Henderson said.

He added: ‘In the past, many companies have tended to avoid revealing much about their tax affairs. Some have hidden behind the inherent complexity of tax management and planning, and a few have even engineered additional complexity to give themselves further protection. This will no longer be tolerated. Instead, companies must be prepared to become more transparent …

‘Companies need to demonstrate that they are doing more than the bare minimum; they need to be able to judge what’s right and be seen as a good citizen. Otherwise, companies should not be surprised if, sooner or later, their behaviour attracts unwanted attention. If a company finds itself in this situation, the first thing to do is establish all of the facts and correct key inaccuracies.

‘Ideally, companies should respond to crises as quickly as possible – but not until they have established the key facts and arguments that they need to make. The company should also identify one individual who takes responsibility for the communications efforts. In most cases, this should be the CEO. Assigning a more junior executive to the role can give the impression that the company is not taking the issue sufficiently seriously.’

Henderson told a conference on tax and transparency earlier this year that ‘it is no longer clever to come up with the smartest tax wheeze’.


Henderson said the government also had an important role to play. ‘When a tax crisis arises, it is always the company that has to justify why they took a certain tax position. There is never any communication from the government as to why they have made a particular position possible,’ he said.

‘Companies should lobby the government to be more transparent and set out the economic benefit of making possible certain tax structures.’