A change to the tax landscape
It wasn’t so long ago that corporate tax policy and practice was considered almost exclusively the domain of tax departments and revenue authorities. But this is no longer the case: corporate tax is an issue that is debated and contested firmly within the public sphere. The days of tax as a back office function are over.
A shift to public reporting
It is increasingly an expectation that companies report publicly on their tax affairs, and while expectations differ across geographies and stakeholder groups, such reporting is generally expected to cover taxes paid (increasingly at country level), tax governance and tax strategy.
In responding to this shift in expectations, companies face a number of challenges.
The first is that when publishing complex tax data, they need to navigate concerns around commercial sensitivity: even those companies strongly committed to the principle of transparency must reconcile this with the imperative of confidentiality, and the maintenance of their commercial position.
The second is that since there is no generally accepted public tax reporting format or methodology, every company needs to adopt a slightly different approach. For the vast majority of companies this is largely uncharted territory, so each is on a journey of learning by doing, with tax reporting evolving over time.
And third, there is a growing imperative that tax reporting should be accessible to an increasingly broad range of stakeholders. It is no longer just revenue authorities or auditors that are scrutinising corporate tax practice, it is also campaigners, advocacy groups, the media, politicians and - indeed - investors. Increasingly, the pressure is on companies to put more data - and narrative - in the public domain.
So how are leading companies approaching the new interest in tax reporting?
At The B Team, we’ve been lucky enough to work with a group of companies who have endorsed B Team Responsible Tax Principles. These companies share a common commitment to tax transparency and enhanced reporting. But in recognising that there is no ‘one-size-fits-all’ solution, each has adopted a different approach.
Interviews and analysis of tax reporting by B Team companies identified key lessons from among the best out there. Public Tax Reporting: Learning by Doing and Through Dialogue reflects on some of these learnings and examines the areas that need further trial and error.
We found that some companies chose to voluntarily publish significant amounts of tax data in relatively raw form. This has the benefit of showing that companies have ‘nothing to hide,’ but deciphering such data is not straightforward. Stakeholders with legitimate questions about a company’s tax practice may not easily find answers. Complex, raw data also risks misinterpretation.
Other companies have adopted a different approach, seeking to explain their tax practices through a combination of targeted data disclosure and narrative. Such reporting is accessible to a wider audience, but many tax advocacy groups argue that without full data disclosure they cannot gain a comprehensive understanding of a company’s tax practices.
B Team specialists identified eight key lessons that apply to most or many of these companies. They don’t necessarily point to a clear direction of travel that will work across the board, but they do provide insights for other companies embarking on their own responsible tax journeys -- especially those who are committed to greater transparency.
Meaningful tax reporting
Nevertheless, consensus on what constitutes truly meaningful tax reporting may never be reached. Different stakeholder groups have differing expectations, and it isn’t apparent that all can be satisfied in full. But companies wishing to address the growing expectation that they adopt a responsible approach to tax must think about how they communicate with their respective audiences.
Companies committed to The B Team Principles are leading the pack - learning by doing, and through dialogue. We hope that others might benefit from this experience, as they chart their own path to responsible tax.
by Ewan Livingston
Ewan Livingston is a Cause Strategist at The B Team, leading the organisation’s work on responsible tax within its Governance & Transparency initiative. Previously he was Head of Corporate Partnerships at ActionAid - a human rights NGO - and has held a number of advocacy and partnership roles across the private, public and third sectors. He started his career in...