Are you considering reputation risk in corporate tax?

27th May 2014

MGI World Are you considering reputation risk in corporate tax?

Companies the world over are coming under ever-closer scrutiny when it comes to the tax affairs. After the financial crisis and global recession governments have found solid PR success from demonising firms considered to be avoiding their fair share of tax.

From Google to Starbucks, big multinationals have been under the microscope. But the issue of reputational risk arising from tax affairs is just as important for small and medium-sized businesses. For accountancy firms, helping clients to navigate the minefield is a key role.

All this has been made clear in a recent survey of businesses worldwide that shows a sharp rise in the level of reputational risk perceived by firms. EY found a 72 per cent increase in companies concerned about media coverage of taxes.

Not surprisingly the most worried were the largest companies.  The Americas saw the highest level of concern by region, though it was still “prominent” in Asia-Pacific and the BRIC countries, where nearly 70 per cent of companies are concerned.

The good news is that more than half the companies are doing something to manage reputation risk.

Measures include companies taking a more structured approach to managing public tax profiles and changing the way they communicate tax-related information to external stakeholders.

Even when the business is doing things ‘above board’, effectively communicating this is a problem. As EY says, reputation risk poses “many tangible challenges for companies, even when the allegations may be of dubious accuracy”.

Accountancy firms can play a key role in assisting the businesses they work with. EY advises: “Companies need to act deliberately and assertively to manage this complex and sensitive issue rather than being put in a situation where they must react to reputational challenges from a defensive posture.”

Of course, despite the significant degree of concern, companies remain keen to reduce their tax liabilities. Research by Moody’s shows US firms have stockpiled close to a trillion dollars in offshore accounts to reduce their tax bills. It should come as no surprise that Apple, which has borne the brunt of a lot of media attention, accounts for roughly ten per cent of this cash hoard. When it comes down to it, reputation always has to be balanced with profit.

Read more on Industry news and Asia, Latin America, North America

MGI World Africa region map with Morocco, Egypt and South Africa countries highlighted

Positive economic steps amid understandable concerns: our member firms in Morocco and South Africa comment on recent developments in their respective countries

21st July 2021

The June edition of the International Accounting Bulletin (IAB) features contributions from our...

MGI World Multi-generation family with logo and text

Clients of California-based member firm RINA Accountants & Advisors benefit from strengthened Trust & Estate Services

16th July 2021

California-based MGI Worldwide member firm RINA Accountants & Advisors, is pleased to announce...

MGI World Despacho Zesati team outdoor image

Mexico-based Despacho Zesati y Cía., S.C., founding member of CPAAI in Latin America, makes the move to the MGI Worldwide network

14th July 2021

Determined to embrace change and remain a leader in its field, Despacho Zesati y Cía., S.C., in...