Close scrutiny of corporations is high on the political agenda following recent events (the 2008 financial crisis, public outrage at the tax affairs of multinational companies, LuxLeaks and the 'Panama Papers' controversy). The attached chart sets out the international and domestic law rules with which companies must now comply requiring disclosure of their affairs.

A multitude of transparency obligations have been adopted or proposed by the OECD, the European Union, and the UK Government. These transparency obligations can, broadly speaking, be grouped into: tax complianceanti-tax avoidance, and conduct of business obligations.

In relation to tax compliance obligations:

  • the UK Government has introduced or is planning to introduce rules which require certain entities:
    • to publish an annual tax strategy; and
    • to certify (via their 'senior accounting officer') to the UK's tax authority (HMRC) that appropriate tax accounting systems are in place.

In relation to anti-tax avoidance obligations:

  • the UK Government has introduced or is planning to introduce rules which:
    • require entities to inform HMRC of tax avoidance schemes;
    • require entities to notify HMRC if they are likely to be subject to diverted profits tax;
    • require entities to actively consider whether their tax arrangements are 'abusive';
    • require certain entities to provide reports to HMRC (by introducing the OECD's recommendations regarding country-by-country reports); and
    • would impose criminal liability on entities which fail to prevent tax evasion; and
  • the European Union is currently considering a proposal which would require certain entities to publish country-by-country reports in the public domain (via websites and public registers).

In relation to conduct of business obligations:

  • the UK Government has introduced or is planning to introduce rules which:
    • require certain entities to identify and disclose any 'persons with significant control'; and
    • would impose criminal liability on entities which:
      • make or accept bribes;
      • fail to prevent bribery by those acting on their behalf; or
      • do not maintain proper procedures to prevent fraud and money laundering.

Further details of the most important elements of the above transparency obligations (namely, effective dates, responsibility, deadlines for compliance, and penalties) are summarised in the chart.

All these measures will enable tax authorities to obtain additional information regarding the tax and wider business affairs of multinational corporations. In turn, this could give rise to an increase in the number of enquiries and disputes. However, failure to comply with the measures would inevitably have reputational consequences. As such, it is critical that entities understand precisely and fully the scope and their ramifications.