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More detailed tax reporting reflects growing expectations, say lawyers

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New research of FTSE 100 businesses has revealed they are going to greater lengths to explain their tax positions, according to the law firm Berwin Leighton Paisner.

Eighty of the 96 businesses in the UK’s leading index in both 2005/06 and 2010/11 increased their level of reporting about tax in annual reports across the five year period, the firm said.

‘Across the board, BLP found that companies are including a longer “financial report” section in their annual statements and going into greater detail about how profits and losses are taxed. Tax is also now referred to more frequently in statements relating to corporate responsibility and the contribution that companies make to the UK economy.’

BLP said factors behind the increase included ‘growing expectations on corporates to be more open about the way they structure their tax affairs; the increasing complexity of the tax regime; and a growing need to provide country-by-country breakdowns of where taxes are paid’.

The findings looked at reports published before the controversy surrounding multinationals such as Google, Amazon and Starbucks, the firm noted, raising ‘the prospect of an even steeper rise in mentions next tax year’.

But BLP added that ‘whilst greater explanation may be well-intentioned, increasingly detailed breakdowns could serve to confuse or obscure rather than illuminate the reality of how a business is performing’.