The Institute of Business Ethics (IBE) says large companies should provide a 'clear and transparent' statement in their financial reports about their position on payment of tax.

The call is contained in a new IBE briefing, Tax Avoidance as an Ethical Issue for Business, which says that businesses should discuss the circumstances behind their tax position, both internally and externally, so that it is clear how they have reached decisions about where and how much tax is paid.

IBE says that while some companies do currently address tax as an issue or commitment in their code of ethics, or similar guidance, the majority only declare a commitment to avoiding illegal tax evasion and abiding by the legal requirements of the countries within which they operate.

The briefing cites the example of Vodafone, which has a stand-alone 'Tax Code of Conduct' that states its commitment to paying what is legally required 'in accordance with rules set by governments' and that it is the government's decision to decide what is a 'fair' amount of tax to pay.

The charity wants other companies to follow this lead and to take the declaration further, pointing to the example of Rolls-Royce which makes specific reference to abiding by the 'intention' as well as the 'letter' of the law in its comments on its policies on tax payments.

IBE says it expects to see investing firms with a socially responsible mandate start to pay closer attention to companies' tax practices when deciding where to invest. It says the announcement by the FTSE Group that it is looking into excluding companies with 'overly aggressive tax reduction policies' from its ethical index, FTSE4Good, may herald the start of this trend.