Multinationals need to disclose more information about how they meet their tax obligations in order to re-build public confidence in the tax system, but are unsure of the best way to do so and are worried about potential risks to their reputation, according to research by EY.

EY surveyed 68 tax directors - 70% from companies with a turnover in excess of £1bn - about their approach to tax disclosure. The report, Tax transparency: building confidence' found that over a third (37%) of companies have already made or planned to make additional voluntary disclosures, although three in four companies do not plan to revieew their approach.

Nearly a third (29%) of survey respondents said they were concerned about the risk of information being taken out of context and negatively interpreted, and 28% said it would be difficult to provide information in a form that would be easily understood.

Companies also highlighted logistical challenges, with 16% citing anxieties over the cost and resource that would be required for voluntary disclosures, and 15% pointing to the complexity involved with obtaining the relevant information.

John Dixon, EY's UK head of tax, said the recent furore over the taxation of multinational companies (MNCs) meant they needed to remove what the public saw as the 'veil of secrecy' surrounding their approach to tax and their dealings with HMRC.

'There's now a real need to repair and restore, re-building trust that tax law is fit for purpose, tax authorities have the skills and resources to police them, and that big business is paying the appropriate amount of tax,' Dixon said.

EY's survey suggests there is no 'one size fits all' approach to disclosure. Around a third (36%) said they provide details of their tax strategy or approach to tax authorities, while 31% provide more detailed tax reconciliation in annual accounts. Country by country reporting was the least popular option, cited by 25%.

Dixon said: 'The most effective public disclosures will be a clear description of a multinational company's approach to tax, what drives its effective tax rate and how it engages with tax authorities. It's an approach that we're starting to see companies adopt, including a few in the FTSE 100. But information must always be accompanied by explanation if it is to have the effect intended.'