- When confronting a storm of negative attention on personal or business taxes, you might be tempted to lay low and wait for things to blow over. However, you should consider these two types of communication approaches which could determine what reputational impact you may face: A proactive approach involves voluntarily publicising the details of your tax position in mandatory accounts in order to pre-empt questions and address them confidently when they arise.
- A reactive approach involves keeping the details of your tax affairs close to your vest, apart from any mandatory disclosure, but having a response plan in place in the event it becomes necessary.
Reputational costs – hard to quantify
Of course, one way to avoid accusations of aggressive tax planning is to steer clear of it in the first place. The increasingly hot spotlight on aggressive tax planning may be cause for businesses to take a more conservative approach to tax planning.
What’s the best approach?
In the final analysis, the best approach to tax transparency and communication depends on the specifics of a situation. The aggressiveness, extent and complexity of your tax practices, the amounts of tax paid and where you pay them, your risk appetite, and the prevailing social and political climate should all be considered. Tax directors need to work with their boards and other key stakeholders to determine a communication strategy that aligns with the broader tax and business strategies.
Whatever your situation, the most important advice is to prepare your businesses in advance or your own response to any potential public attention on your tax matters. That way, you can keep a measure of control of the message and make your position known.