ESG Tax Transparency

In 2019, Business Roundtable (BRT) released a new Statement on the Purpose of a Corporation, signed by 181 CEOs of American firms who committed to lead their companies for the benefit of all stakeholders-customers, employees, suppliers, communities, and shareholders.1 ESG advocates believe that companies that adapt to changing socioeconomic and environmental conditions are better positioned to see strategic opportunities and create competitive advantages over less ESG-focused enterprises. Many companies today have made their board-approved tax strategy publicly available in a tax strategy document. Since 2016, doing so is a legal requirement for large companies and groups in the United Kingdom.10 Corporate governance recommendations for listed companies in countries such as Spain and Denmark now also include an expectation to publish a board-approved tax strategy. PUBLIC TAX POLICY At the other end of the tax transparency spectrum, we find substantive quantitative disclosures, which mainly take two forms: * the total tax footprint: a full accounting of an MNEs contribution to society comprising the company's total taxes (including both corporate income and non-income taxes) and taxes collected (such as taxes collected and remitted on behalf of others, such as VAT); these are often reported on a global basis by type of tax, but increasingly we observe MNEs report their total tax footprint by region and, in some cases, by country; and * country-by-country reporting: a disclosure of corporate income tax paid on a country-by-country basis, often accompanied by other figures (for example, revenue per country, number of employees per country, and more) to provide context. Most companies will evaluate the actions of tax transparency leaders (for example, Unilever), reporting standards (for example, GRI 207), relevant rating agencies' ratings (for example, S&P Global's Sustainability Index), principle-based standards (for example, Future Fit12), business-led initiatives (for example, the B-Team principles13 and the World Economic Forums Stakeholder Capitalism Metrics14), the expectations of NGOs (for example, the Fair Tax Mark15), voluntary schemes (for example, the ATO Tax Transparency Code and the Extractive Industries Transparency Initiative16), and existing regulations (for example, the European Union's Capital Requirements Directive IV17) and proposed regulations (for example, the EU's public country-by-country directive18).