To begin the conversation, we convened a group of corporate tax professionals to scope some of the issues – a short report of the event can be found here. The debate was taken further by bringing corporate ESG reporting leaders, civil society, corporate communications, and investor relations specialists together to input from the ESG angle – a summary note from the event can be found here.

Next, the conversation was deepened with investors and investing professionals to explore which of the ESG elements of tax policy (especially the S & G) are of the most interest to investors; how tax can be better integrated into ESG; and how best to work towards transparency. The conversation was held under the Chatham House Rule and was attended by 14 participants 1.

Out of this discussion, the plan is to next involve rating agencies and then the standard setters before publishing a think-piece on what was heard and learnt later in the year.

Executive summary

The roundtable explored the different global attitudes towards tax, ESG and investing particularly between the US and Europe. However, greater transparency is the direction of travel and the introduction of mandatory Public Country-by-Country Reporting for large MNEs in the EU is just the latest example of this. Corporates who get ahead of the curve and start explaining their tax payments could develop better relationships with stakeholders. Investors look for a range of information - from potential impacts of earnings per share to evidence of responsible tax practices to better engage and understand the position of a MNE. However, data on its own is not enough. If companies don’t communicate their story alongside the data, that data can easily be misunderstood or misinterpreted which can lead to issues of trust.

There were calls for a better narrative explanation of tax around ESG especially as there is a lack of understanding of tax as an ESG issue. It was agreed that this debate shouldn’t be about trying to point the finger but about what type of tax systems are needed and then start to engage on how companies can make meaningful disclosures. An incremental approach is a good way to move in the right direction.

Global attitudes

A realistic approach to a transatlantic framework

It is important to remember that while issues concerning tax and ESG are gathering steam in Europe in particular, there is a more varied picture in different continents. There is a notable transatlantic divide. One participant expressed the view that in the US, the investors, the companies and ultimately the shareholders don’t put tax transparency high on the agenda. There is still the belief that as a low tax rate improves earnings per share it is in the interest of investors. Some firms use hundreds of data points to assess potential investments. For investors with a wide investor base and global portfolio – all having differing attitudes to tax and transparency – tax would not in itself be determinative of any investment.

Nevertheless, many US companies are starting to follow the transparency debate more closely and some have come under pressure from investors for greater transparency

There is no monolithic “American view” any transatlantic framework needs to be realistic about the US market.

It was also queried how investors could realistically expect MNEs to begin to align on tax transparency disclosures when global tax systems encouraged them to play “find the lowest corporation tax rate”? Although, the global minimum tax proposed by the OECD may reduce such tension.

Linking tax, ESG and the common good

The way to help resolve the trust issue is to show everything – but with a narrative.

Some participants thought that as governments address the dual needs to make interventions for the public good to build back after the pandemic and to manage deficits, they will likely start to look at tax as a means to generate further revenues going forward. This is also expected to put a spotlight on companies’ practices.

It was thought that greater transparency is the direction of travel and the introduction of mandatory Public Country-by-Country Reporting for large MNEs in the EU is just the latest example of this. Corporates who get ahead of the curve and start explaining their tax payments could develop better relationships with stakeholders.

There is a need for a better narrative explanation of tax around ESG especially as there is a lack of understanding of tax as an ESG issue.

A key issue is getting the right debate about the kind of tax systems desired both domestically and globally. Transparency helps by informing and getting the right engagement in the debate. Companies should be encouraged to engage.

A level playing field?

One investor noted that small companies may have limited capacity in the tax department. Another noted that they would be reluctant to invest in companies which lacked transparency, however, it can be harder to hold larger, more global companies to account.

One participant noted that some MNEs, almost without exception, locate certain activities in low tax countries. It was thought that such decisions should be explained far better than at present.

It was expressed that the purpose of capital markets is to be transparent for investors and investors should push on this to help ensure the S and G in ESG are really brought to bear. Tax will likely play a huge role.

What do investors look for?

The information investors looked for ranged from looking at potential impacts of earnings per share to wanting evidence of responsible tax practices

One participant said they use tax disclosures to try to understand if investee companies are partaking in aggressive profit shifting and there could be a potential shock to earnings per share. They would also look for adherence to reputable responsible tax principles. If a company’s tax profile raised concerns, they would engage to understand the situation better – and often they have found credible answers are given explaining the tax position. Ultimately it would be up to the investment team to make the final decision.

Other participants who focused on impact investing and ESG credentials noted that looking for a responsible tax approach was a key indicator. It was recognizsed that doing a detailed analysis was often too difficult, but investors did look at effective tax rates and how these compared with peer companies.

Data is not enough

Embrace disclosures and narratives for better stakeholder relationships

One participant thought that once Country-by-Country Reporting becomes mandatory – even if it is not perfect – the only way to build and maintain trust is full transparency. GRI received strong support from some participants – however, it was identified that narrative is an essential component of transparency.

Data on its own is not enough. If companies don’t communicate their story alongside the data, that data can easily be misunderstood or misinterpreted which can lead to issues of trust.

If the goal is meaningful disclosure, then explaining the data clearly and simply is key. Developing a clear narrative can be time-consuming and it was noted that although the EU Public Country-by-Country Reporting rules may start from mid-2024 the time to prepare is now.

One participant pointed out that many companies they have spoken with that have proactively and voluntarily disclosed their tax payments around the world have now come to embrace tax transparency and enjoyed the more productive dialogue with stakeholders that it has allowed.

Incremental steps

It was suggested that a pathway for companies to provide more meaningful disclosures would be to follow incremental steps:

  • Step 1 – Explain the company’s intentions to do something and make a declaration about what to disclose.
  • Step 2 – Commit to working with investors and wider stakeholders.
  • Step 3 – Work on the why and how of various disclosures.
  • Step 4 – Once disclosures have been created, sit down with stakeholders to discuss the implications.




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