Trends in voluntary tax reporting - seventh edition
The tax transparency landscape is evolving. In our annual publication we look at how tax is becoming a key sustainability issue for many organisations. From the release of the new GRI sustainability standard on tax at the end of 2019, to an increased interest from Environmental, Social, and Governance (ESG) investors in the tax affairs of businesses. The implications for tax and transparency are wide ranging, and the level scrutiny will only intensify as a consequence of COVID-19.
Download the report for a closer look into our review of voluntary tax reporting in the 2019 FTSE100 year ends.
A review of the tax disclosures in the FTSE100 reveals an increase in tax transparency over the last 6 years, with some leaders dedicating time and energy to developing voluntary disclosures to inform the debate on tax transparency and improve understanding.
Read more below.
Which framework should I follow?
There is increasing scrutiny of tax from a range of stakeholders and many companies are considering their disclosures with some asking “which tax transparency principles should I follow?” There are a number of tax transparency frameworks proposed by different stakeholders but is this the right question? In our view, companies should be asking “who is reading my disclosures, what do they want to know and what do I want to tell them?”
Is anyone reading published tax strategies?
All companies should have now published a tax strategy if required to do so and we have seen a range of approaches. In the FTSE100 the average tax strategy was 600 words long, ranging from 100 to 2,500 words. Many were global strategies, with reference to tax governance frameworks and in some cases, providing voluntary disclosures to enhance reputation and to build trust with stakeholders.
What are the latest developments?
CbCR is a term that is used broadly, but in simple terms it means reporting on certain financial information on a country basis instead of a global basis. Under OECD BEPS Action 13, over 80 countries have passed legislation requiring companies to disclose this information privately to tax authorities. There are proposals in the EU and with the GRI (Global Reporting Initiative) for public CbCR with a small number of companies making a voluntary disclosure of CbCR data.
Which disclosures could add value to your business?
Tax is a complex topic. Mandatory disclosures prepared under international financial reporting standards do not always provide a clear picture of a company's tax affairs for a non expert reader. Some companies are making voluntary disclosures to provide a better understanding of their tax affairs, recognising always that there must be a business case for voluntary tax disclosures.