British companies are confused by mixed messages about tax from the government, according to the CBI.
The business lobby group says the government’s pro-enterprise drive, including cutting the corporation tax rate from 28% to 20% by 2015, is being muddied by its rhetoric on what companies pay.
“Many UK CEOs of global businesses have had telephone calls from their global CEOs somewhere else on the planet saying, 'We are just a bit confused,’” John Cridland, director-general of the CBI told The Telegraph.
“On the one hand we see this drive to make the UK the most tax-competitive capital in the G20. On the other hand, politicians are increasingly critical of business in Britain as somehow not paying its fair share in tax.
“That confusion of purpose – are we making the UK more tax competitive? Are we sending signals that somehow big business can’t be trusted? – needs reconciling.”
The comments came as the CBI published seven principles on tax which it said all UK businesses and businesses operating in the UK should follow:
- UK businesses should only engage in reasonable tax planning that is aligned with commercial and economic activity and does not lead to an abusive result
- UK businesses may respond to tax incentives and exemption
- UK businesses should interpret the relevant tax laws in a reasonable way consistent with a relationship of “co-operative compliance” with HMRC
- In international matters, UK businesses should follow the terms of the UK’s Double Taxation Treaties and relevant OECD guidelines in dealing with such issues as transfer pricing and establishing taxable presence, and should engage constructively in international dialogue on the review of global tax rules and the need for any changes
- UK businesses should be open and transparent with HMRC about their tax affairs and provide all relevant information that is necessary for HMRC to review possible tax risks
- They should work collaboratively with HMRC to achieve early agreement on disputed issues and certainty on a real-time basis, wherever possible
- Firm should seek to increase public understanding in the tax system in order to build public trust in that system, and, to that end they should consider how best to explain more fully to the public their economic contribution and taxes paid in the UK. This could include an explanation of their policy for tax management, and the governance process which applies to tax decisions, together with some details of the amount and type of taxes paid
