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Tax transparency and Sustainability workshop, 25 June 2020

This workshop covered the latest developments in the tax transparency landscape.

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This workshop was led by PwC tax transparency and sustainability experts and focused on the latest developments in the tax transparency landscape. It covered the increasing interest in tax from ESG investors, the new sustainability standard on tax (GRI 207- tax) and looked at trends in tax disclosures from the 2019 reporting season.

We were delighted that Dave Murray, Tax Policy Principal at Anglo American was able to join us to provide different viewpoints on the debate.

We looked at insights and a fresh perspective from top reporting organisations along with key findings from our own research.

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Andrew Packman: Ladies and gentlemen, thank you very much indeed for joining us this morning. As you may have just heard me say, my name is Andrew Packman. I’m a tax partner, I lead what we do on tax transparency and I’m really very pleased to have such a good group of people with me this morning to talk about what’s going on around tax transparency and sustainability.

Just to explain and do introductions, I’m very pleased that Dave Murray is able to join us. Dave is the Tax Policy Principal with Anglo American. Anglo American has, for a number of years, been a leader in tax transparency producing insightful and thoughtful material. And Dave has had a long career in a variety of organisations, where he has been one of the most insightful commentators on what’s going on in tax transparency and how you might deal with the varying agendas that we need to be aware of.

Alan McGill is one of my partners and is our Global Leader in Sustainability reporting, measurement and assurance. And many of you will know Janet Kerr - Janet and I have worked closely together and Janet leads very much the work we did around Total Tax Contribution, so a number of you will know her from particularly the work with the 100 Group.

I just wanted very briefly to set the scene for what’s been going on around transparency. I’m not going to go through this slide in detail but really this is a story of significant acceleration. You can see, we could have gone back a little further, but we start the sequence with the EIT initiatives for the extractives in 2003. The global financial crisis then provided a very significant form of acceleration, given the concerns which came out of the crisis around particularly the taxes being paid by the financial sector. And you can see then the responses which clearly included BEPS initiative, but also from a transparency perspective, the CRD IV for the banks and then the EU Accounting Directive for the extractives. We’ve seen a variety of national responses, but there’s also in Australia, but also the tax strategy requirements in the UK and we’ve seen the introduction as part of BEPS of the Action Item 13, the Disclosure to the Tax Authorities, and then the proposals which are still going through the European Union for public country by country reporting and we’ll come on to talk about that in a little more detail in a few moments.

There have been a number of groups of companies who have looked to respond to this changing environment - the B-Team is perhaps best known and then there’s also the European Tax Forum. And so during the period up to 2019, we’ve seen a gradual increase in the level of interest from both media and from NGOs in growing demands for tax transparency, all in the context of a concern and some skepticism as to whether corporates are paying the right amount of tax in the right places. And, in many ways, that reflects the growing proportion of international trade captured by multinationals and the continuing fiscal problems faced by governments particularly in the wake of the financial crisis. And that has all then been accelerated over the last 6 months or so by the introduction by the GRI, of their Standard 207-4, which was launched last December and which comes into effect in 2021 and essentially supporting public country by country reporting. And many of you will be aware that at the World Economic Forum meeting at Davos in January of this year, the International Business Council produced a consultation document on environmental and social reporting and as part of that they had four pillars, one of which was around prosperity and the prosperity pillar included the GRI 207 principles, in particular supporting public country by country reporting. And many of you will be aware that there are ongoing discussions with the World Economic Forum about the most appropriate form of disclosure, and I think it’s fair to say that there is a continuing debate between NGOs and politicians, in particular in Brussels, who are very keen opponents on public country by country reporting supported by some multinationals who have decided to make their CbyC data public. While on the other side of the debate there are some groups who are concerned that the data without information, the data without the context of understanding the business, may be likely to lead to confusion and misunderstanding and therefore reduce confidence in business. And that debate continues and we may hear some of that a little later on I suspect.

And then all of that has then been turbo-charged by the impact of Covid-19. I think there are some short-term and there are some longer-term elements in that. In the short term we have seen the connection which has been made by a number of governments - France, Belgium, Denmark, us obviously - between the receipt of the availability of public support in the crisis and the tax footprint. The most obvious connection being made that people should not have access to public funds where they are based or used in tax havens. I think fairly obviously there are likely to be longer-term impacts as governments seek to repair their public finances. It would be naive, I think, to expect that those governments would not look to the corporate sector to make a contribution as the public finances are repaired and tax transparency, I think, is likely to come up the political agenda again. Clearly the developments of the OECD last week play into that picture and the tension between the Americans and their distaste or their resistance to pillar one, and the view from Europe including the view from UK Treasury that they are unwilling to accept pillar two without pillar one. And I think clearly no-one knows quite what will happen, my instincts are that not very much will happen this side of the US Presidential election, but we may well be in for a period of unilateral action with multilateral cohesion and co-operation perhaps being rather limited. Again we may hear some more from David Murray later on that.

So that is an attempt to set the context for what we’ve seen. A story of accelerating demands with greater transparency, an environment where media and NGOs have been skeptical about the taxes paid by multinationals and where there is a spectrum of views among corporates on how they should respond, with some going for very extensive voluntary disclosures and some resisting that trend or thinking that inappropriate. To be clear, from a PwC perspective, we are neither evangelists for greater transparency nor do we take the position that public country by country reporting should never happen. We simply aim to understand what is going on and to help our clients respond to it, asking the question essentially who is interested and what is helpful to them in explaining the position.

Just in summary then, I’ve talked about Covid-19 and the impact of the accelerating effect and I’ve talked about the GRI 207-4 and the way that was picked up by the IBC and the continuing pressure for public country by country reporting. And then the final point, I think, is just to say that there is increasing continuing pressure from ESG investors who make the connection between tax transparency and good governance and good corporate organisation more generally, and I think we will continue to see continuing pressure from investors who are interested in that area.

I’m now going to pass over to Janet Kerr to talk about what we’ve been seeing over the last 12 months or so.

Janet Kerr: Thanks Andrew. So this section then is just putting a little bit of colour around that tax standard. So I know we opened this WebEx to sustainability teams too, so this GRI standard is part of a series of sustainability standards - this tax standard, which was brought in December 2019, covers four areas:

  • Approach to tax
  • Tax governance
  • Stakeholder engagement

I think probably those areas, particularly for UK companies, there’s already thought and disclosures around those areas. It’s that fourth area which Andrew mentioned - country by country reporting - where there’s been more focus. And just to touch on this sustainability standard, do you have to follow it? The point here is if your company follows the GRI standards for the rest of sustainability reporting, so waste, water and areas like that, there is an expectation that if tax is material, then the tax standard will be followed. So it’s worth having that conversation with your sustainability team.

But let’s look at that fourth area in more detail, and the next slide here has the extract of actually this is what the standard says. So it’s asking four things like:

  • Activity of the entity
  • Number of employees
  • Revenues / Profits
  • Corporate income tax paid and accrued

So very similar then to the OECD BEPS template, so in that template Table 1 is shared privately with tax authorities. So is there really a problem with this? There’s kind of two areas to pick up on - the first is, there are some subtle differences between the GRI and the BEPS template around revenue, around withholding tax, around uncertain tax positions so the data points aren’t exactly the same. The other area then is when, for OECD BEPS, when the table is shared with tax authorities it’s being shared privately with tax experts, with people who understand the data. And the next slide just kind of pulls out some of those issues. So sharing the table with tax authorities for high level risk assessment, they know how to interpret the numbers and they have access to local transfer pricing files. Putting that data, Table 1, out publicly for a non-tax expert to look at can lead to misinterpretation and misunderstanding. For example, how does the business model work? Where is value created in the business because that will explain profits and number of employees? If the table shows operations in tax havens, actually those operations might be because there is a trading entity there or because of a regulatory environment and the table or data itself doesn’t give that insight. Again transfer pricing, where is the value arising through the business? Is tax being paid where there is economic substance? It’s difficult to understand from the table of data and, of course, it’s focused on corporation tax and doesn’t pick up that broader picture. And so our suggestion is that if Table 1 is to be published, it’s the additional narrative that is really key to this - so it’s that piece on the right-hand side, tax transparency to whom and for what purpose - what’s the additional narrative that you need? And there’s the other element, the kind of final point there is, if you’re going to put this data out there publicly how can you get confidence over those public statements.

And my next slide shows the pyramid with tax transparency at the top. So your approach to tax transparency should be agreed with the Board, obviously the Audit Committee - the public statements have with them a reputational risk. And supporting that tax transparency approach is a tax strategy, so both the external tax strategy but also a more detailed internal strategy, so summarising objectives agreed by senior management. And supporting the strategy there is tax risk management, so actually how is the tax control framework monitored, what’s the controlled environment like? And then at the bottom, is the day-to-day operations - so the risk register, the roles and responsibilities. So, it’s that supporting your public disclosures with the operational piece below that and that comes through in the GRI.

And the next slide I’ve just put a bit more colour around the first three areas of the GRI - so the approach to tax, if you look at the content they’re asking:

  • Is there a strategy?
  • Who approves it?
  • How is it linked to the broader business?

The governance is asking for details around the tax control framework, around any assurance and then stakeholder management is describing the approach to stakeholder management, so that is transparency to whom and for what purpose.

So if you go onto the next slide, this is looking at some of these disclosures in detail. So I’ve just got a couple of slides - I thought the advantage of a WebEx was that we could put these on screen so you can look at them in more detail.

So this is Vodafone. So Vodafone puts out an 80 page tax report. Within that tax report they publish their Table 1 (BEPS table), and that’s the extract at the top of this screen. So you can see the headings there, they’re familiar for OECD BEPS and that’s their Table 1 disclosure. What they then do, and this is the narrative on the right-hand side, is explain why that’s really hard to interpret. So because you’ve got unrelated and related turnover, the turnover number seems really large. Because you’ve got dividends and write-offs within your profit, that can distort the profit number when you’re trying to compare that to tax. So they have a narrative which says why it's really hard to understand, and then they put their own analysis of their contribution by country and its broader than corporation tax (and that’s the table at the bottom). So it shows corporation tax, it shows profits/revenues and it shows other taxes they pay like employment taxes and capital investment and employment. So really when I mention the narrative, really extensive narrative around those numbers and, in addition, they put up a diagram of their business model. So they explain that within their operations, within their company, they have an operating company which is responsible for liaising with customers and they have support functions in the areas like technology, commercial, brand etc. And these companies support the operating companies and so explaining why you’re going to see within your Table 1, you’re going to see different profit ratios, different tax rates.

And the next slide I’ve got is Pearson. So Pearson has a narrative around tax havens. So again if your Table 1 shows operations in tax havens, Pearson has this extract kind of explaining why that is. So they say, for example, that they have operations in Bermuda. These operations are for a captive insurance company, the reason they’re there is that Bermuda is recognised as a global insurance centre for regulatory purposes and in fact they pay tax at UK rates on those profits. So again, it’s the narrative around the table which really helps with understanding those numbers.

And the next slide looks at Transfer Pricing. So this Anglo American, showing the value chain within the business. So starting from finding the minerals, through extraction and processing; explaining the value driver at each point, and then explaining again that there are inter-group transactions with operations around insurance, around financing, around commercial and explaining the reason for those inter-group transactions and how they’re priced within the company.

So, just a couple of examples of disclosures in these areas. In fact we look at the whole of the FTSE 100, we look at disclosures in the FTSE 100 throughout, and I’ve shown you the leaders in transparency. If we go onto the next slide, this shows the results of our latest review. So we’ve looked at the FTSE 100, we’ve looked at tax disclosures - we’ve got a 40 point score sheet - and we’re showing 8 of those points on this slide. And the bars show the percentage of FTSE 100 companies reporting last year in 2018 and then this year in 2019. So tax havens, for example, showing the Pearson example, 30 companies in the FTSE 100 reported in that area last year, and 36 companies this year. And just making the point that Pearson obviously is a very detailed disclosure, and many companies having a much briefer disclosure just referring to, it just maybe a sentence, around operations in tax havens.

Transfer Pricing - I showed you the Anglo picture - we’ve got 46 companies this year with disclosures in that area. The biggest increase was around the risk framework, so 85 companies now reporting in that area, and that kind of goes back to this piece around giving comfort around your public disclosures. Total Tax Contribution disclosures, 40 companies disclosing in that area and perhaps due to public country by country. The area that we see the fewest disclosures is the Cash Tax Reconciliation, and the next slide just kind of gives a really good overview as to what on earth do we mean by that. And this is taking the point of, if I’ve got a tax charge in my profit and loss account, why aren’t I paying that amount of tax? So Lloyds, in this reconciliation, show at the start of the tax charge, show why the payment is different because of prior adjustments etc and then show the other taxes that they pay, so the Irrecoverable VAT, the Employers National Insurance, so giving the Total Tax Contribution on the right-hand side.

I think the final piece, as Andrew started off, it’s very much we talk about tax transparency to whom and for what purpose - there’s no point in voluntary tax transparency disclosures unless they add value for the company. But we are seeing an increasing number of companies with standalone tax reports, so 22 companies in the FTSE 100 had a standalone tax report in the last year.

So I hope that was useful, kind of putting some more colour on the GRI standard and looking at, in some detail, what some of the leaders in this area are doing. I’m now going to pass back to Andrew, just to go through and introduce the panel and get some perspectives and insights on that.

Andrew Packman: Janet, thank you very much indeed. So the way we’ve organised the time, as I said at the beginning, is to try to provide in the first half some material on what’s going on in the broader environment and then, what Janet’s just taken you through, in terms of how people are responding to it. What I want to do now is to have a discussion bringing in two new perspectives. One from David Murray from Anglo American around how the corporate response recognising that every company has a different economic profile and comes at these questions in a different way. So not suggesting for a moment that what one company does will be right for another, but I do think it’s helpful to hear from someone who’s been thinking about this issue for a long time and now with a company who has been a leader in the area as to where their current thinking is. And then the other question, which is increasingly coming up in an environment where more information is being put in the public domain, is how confident are you that this information is right? There is greater focus clearly, and not just from NGOs but from government as well, and so all the questions around the governance and the assurance you have around that data is increasingly coming to the fore.

So we are going into the panel discussion now. Please do send your questions through by using the chat function at the bottom of the screen. So I think Janet, you’re going to be asking the questions.

Janet Kerr: The first one was a general question to the panel was around ‘What’s the impact of the pandemic on the contribution of business’? Dave, can I put that one to you first?

David Murray: Morning Janet, hopefully you can hear me and thanks to you and Andrew for the presentation this morning. And I’ll start off with an apology for those people who have joined hoping to see the well-groomed, younger chap in the slide - the pandemic has had a profound effect on my hairline and my waistline as well as the things we’re talking about today. On a more serious note, I think this pandemic is having a profound impact on the way that many businesses are having to interact with other stakeholders. But I think really the longer-term impacts will just be to accelerate the trends and accentuate the challenges, which are already quite apparent in the relationship between business and society.

There are some obvious examples coming out of the crisis that demonstrate those tensions and those opportunities. Many businesses have quite obviously needed to accept financial and non-financial support from government, and there has been considerable media and public scrutiny over the way those firms in particular have behaved, with respect to things like dividends and executive pay. As I said that is really stoking attention that already existed. Shareholder return and executive pay is not really a new battle ground, this is something we’ve been hearing for quite a long time but just not hearing it as loudly. The Scottish parliament recently passed that Bill that blocks access to the Covid-19 grants that they administer. Where firms are based in? What they consider to be tax havens? And France and Denmark are looking at similar measures, we know. But again calls for politicians to crack down on tax havens and greater transparency around global operations, is nothing new - we’ve seen in the presentation this morning that this has been going on a very long time. There have been some positive opportunities to explain the positive influence that business can have on society. I can tell you very briefly what we’ve done. We’ve prioritised the safety and the health of our people alongside business continuity, and we’ve got a designated team who monitor the situation in all the countries that we do business and meet regularly to update our responses to that. We’ve implemented a week air programme that support the lives and livelihoods of our people during the crisis and that includes really four areas. The first is the obvious one, workplace controls. But it also includes developing tailored community support programmes to help the communities we work in manage the crisis, through things such as increasing testing in medical supplies and those kinds of things. We've also strengthened our mental health support programmes and our partnership with charities to help identify those people who may be subject to abuse. So there are positive things that people can do in society, it’s not just us but I can just talk to us more clearly than some others.

But the interaction between business and society is a complex discussion even absent of the crisis, the crisis has just put it back on the headlines. And many commentators, as we can see now, are calling for this fundamental rethink of how business and society interacts. There is an increased focus on sustainability more broadly, on business’s contribution to the societies and communities that they do business in, both financial and non-financial. At the very least, and this is really the key point, people want to understand the value that businesses and individual businesses are bringing to their society, because at the moment they feel like they don’t understand that value.

And if I might just take one minute more, I would like to mention the work of the B-Team which was mentioned on one of Janet’s slides cos we are supportive of the B-Team tax principles. I mean they’ve been trying to address this dynamic for many years now. They’ve been working to redefine a culture of accountability, creating new norms at corporate leadership, to try to build a better world for businesses and communities and future generations. And it’s hard to see how that relationship between business and society can be sustainable if it doesn’t include tax. Tax is such a fundamental part of how business contributes to society and the communities it works in and with. And whilst Covid has put this relationship back in the headlines, as I’ve said a couple of times already, it’s not a new phenomenon. We saw this narrative during the 2008 financial crisis and it hasn’t really gone away. And for those that think, oh well that was 2008 and we survived that and we’ll survive this too, without being more transparent and engaging in the debate. A lot has actually happened since 2008 and we’ve had the best projects - we have to do country by country reporting for tax administrations, some industries already have to do public country by country reporting, strengthen non-financial reporting directives. It didn't fade away in 2010, there has been real change and I think it would be naive to think there won’t be more real change being enforced on business in the coming years.

So, apologies for a long answer to a short question Janet. But I guess in summary, I think we’ll see an acceleration in the existing calls for greater scrutiny of business’s sustainability programmes more broadly, the way they interact with society more broadly and tax transparency is obviously going to be key to plan for.

Janet Kerr: So thanks Dave, and a great point that, we’ve talked a lot about tax here, but actually that there’s the more broader piece that comes into focus here. Alan, on that particular point, can I pass to you for thoughts around ‘how does the pandemic change the role of business’?

Alan Gill: Yes thank you Janet, and again good morning and good afternoon to all of you who are on the WebEx.

I think for me there were two things that actually I would say are new for me as a result of the Covid/pandemic issue. The first is that from an investor perspective, the whole ESG agenda has definitely turned a corner now. Investors are now increasingly wanting to understand what businesses are doing around that broader ESG agenda and are therefore absolutely looking for content, information and understanding strategies about what businesses are doing and how these particular risks and issues do affect that business model and the ability for that company to generate financial returns going into the long-term.

Certainly I would say that in the last nine to twelve months or so, in that relatively short period of time, that the level of interest from investors has definitely changed and we are now seeing them asking those questions when companies go on those investor roadshows or such. I think the other thing that has happened, coupled with that now as part of Covid scenario and the biggest change that I think has happened within the last three months, is that the ‘S’ part of the social agenda under that ESG bit has absolutely been dialled up in terms of what Covid is starting to shine the spotlight on. So how companies have been responding and looking after their employees? What they’ve been doing with their suppliers? What they’ve been doing for customers, local communities? That whole social agenda has fundamentally changed and essentially I think risen up that corporate reporting, if you like, ladder.

And what does that mean? Well clearly, you know, you’ve heard from Dave about how the role of business in society is an absolutely key and important one. And it's probably for the first time in really, I would say, about thirty years that businesses are having to start to engage now in a way to really demonstrate how and what role they do have in society. And of course, tax and taxation is a massive part of that huge contribution that businesses do make to governments, in terms of the revenues that they basically raise. And therefore the reporting around this is a massive issue for a lot of organisations and therefore that’s why you’re seeing, I think, that increased demand for information around transparency, on strategies at the levels of tax that are being paid.

So for me, those two things around what’s happening in that investor community and their interest in this area. And I just don’t think it’s investors, clearly there are other parts of broader civil society as well. Outside of those more traditional areas of the NGOs who’ve got a particular thematic issue around tax transparency, the sort of broader parts of civil society are definitely, you know, taking more interest in what companies do. And that, as I say, that ‘S’ part has absolutely been dialled up as part of the Covid impact and implications.

Janet Kerr: Thanks Alan. That’s kind of…..yeah, tax is important but there’s that broader piece as well. There’s a question that’s come in that’s just picking up on that final point there, which is that you talked very briefly, about the different stakeholders. So the question is around what do different stakeholders want? So Andrew, can I pass that one to you around the stakeholder piece?

Andrew Packman: Yes. No thank you. I think it’s one of those areas which has moved really quite quickly. But again, I would start from a position of saying that there is no simple answer. It very much depends upon the nature of the business, of its sector, of the various impacts of which it has. So I think one has to start every time from the identity of the company and its own stakeholders and what people are generally interested in, rather than reaching for some generic answer. So in that context, I think you know fairly obviously, we have seen a much larger number of people with very different interests start to take an interest in the approach to tax which companies take. Clearly, you know that does vary depending upon the public profile and whether a business is consumer facing but for some groups, particularly you know large, well-known consumer organisations, there will be interest from the media in their approach to tax and, of course, there is a sustained interest with a kind of underlining skepticism, from NGOs.

I do think it's important to bring into this broader policy makers and politicians. So we’re seeing in the context of the work of the OECD, we’re seeing a lot of work being done to understand what the impact of Pillar 1, for example, would be on companies, and part of that has to rely upon the information that companies are providing. Clearly there are policy makers, at a domestic level and in Brussels, who are obviously increasingly interested in promoting transparency and make the connection between good governance and these issues. And when it comes to analysts and investors, we’ve seen perhaps Lloyds Bank is the most public example of this, where we have seen a very clear interest from an investor on how companies they invest in approach tax. We also see it from analysts who see a correlation between the quality of tax disclosure and broader corporate governance. So I think, again sorry Janet for a slightly long answer, but I think you need to start with the identity of each company and its own economic profile but then to think broadly about the people that are interested. Janet Kerr: Thanks Andrew and absolutely there’s kind of a range of stakeholders. Dave, can I ask for your perspective? Are some stakeholders, do you approach them in a different way to others? How do you manage the kind of stakeholder piece?

David Murray: I mean, I think what you really need is a clear message on what you’re going to say. And I think how you engage with different stakeholders might be different. There’s a lot of things we put out there publicly and then we have discussions with stakeholders, external stakeholders. So we get a lot of NGOs and media coming to us with questions and we engage with them in answering their questions, trying to help them to understand our tax numbers, our tax transparency, our tax governance. And I think you do need to engage them in different ways to how you might engage the general public. You might be dealing with people who’ve got more experience in this area, you might be dealing with people who might know where the holes in what you’re saying are and know where to look even more than the general public might. So you do need to be sort of careful in that respect and respectful.

Internally, we’ve got a very wide range of interested stakeholders - I deal with our sustainability colleagues, I deal with our investor relations colleagues, corporate governance, finance, you know there’s loads of people internally who are interested in this as well. And then the tax administration and I think, and governance. You just have to be very careful that what you say is consistent and I think if you try to attack this on a stakeholder by stakeholder basis without doing that initial work, to think through actually what is our position? What is our governance? How much taxes are we paying? How does it link in with sustainability and our broader contribution to society? I think that’s probably where you’ll come a bit unstuck. You need to do that thinking first and plan around how you are going to engage, because as you say there are so many different ways and people that are going to be asking for engagement.

Janet Kerr: And actually Dave, there’s another point here and I’ll just come straight to you with this. Is the GRI standard enough, is one of the kind of points? What are your views on that?

David Murray: Yeah, it’s a good question. I mean, in terms of GRI we typically think of this as something that investors will look at and the way we need to engage with, say, media or the public might be in a slightly different way. I think increasingly investors are interested in tax. I don’t mean that all investors are interested in tax or that it's the most important thing - I think we sometimes think of ourselves as more important than we are. But there’s clearly a trend that they are interested in tax and that’s very clear from what I hear from our Investor Relations team. We see it from institutional investors, pension funds, fund managers - they’re all publishing their tax standards that they will hold their investments to. I think what’s difficult is that they all want slightly different things. So some analysts tend to be more concerned with detailed information on the tax rec, so that they can assess individual tax risks in detail. Others are more focused on transparency more broadly and governance and making sure that the company is being a good corporate citizen and explaining itself properly. Some investors even still today support publicly tax minimisation, but I think that view is increasingly challenged. But what I see you know if I step back, investors are looking for signals on probably three things:

  • forward engagement on tax
  • a clear tax strategy; and
  • transparency on taxes paid in different jurisdictions.

And the ESG analysis has become quite sophisticated in recent years, they are now including things like whether their approach to tax or country reference reporting, ETR, governance are reported. But even there they are prioritising different elements within that industry so it’s really hard for anyone to get a consistent view. So I think GRI will be helpful in getting a consistency of data, particularly across the financial metrics under GRI 207-4. Is it perfect for every business in every situation? Will it tell investors and the public everything they need to know? No, quite clearly not. But I don’t think that’s not a reason to say it's not sufficient or it’s not enough. It’s true of all reporting standards. I mean, I trained as an accountant, I look at IFRS and UK GAAP and US GAAP and that’s why we have 200 page annual reports from companies instead of 30 page annual reports from companies. Because reporting standards are not there to tell you everything you need to know, they’re there to tell you some things in a consistent way. And that's why I think it's incumbent on individual businesses, alongside that framework, to paint the broader picture of their tax contribution and the broader picture of their contribution to society in a way that will resonate with their stakeholders, including but not limited to investors.

And that’s the really hard piece, thinking back to what I was really saying earlier. It’s getting that message in place and the thinking around how you want to communicate this. What actually is your interaction with society? What are your obligations? And then the reporting or discussion after that becomes a little bit more easy.

Janet Kerr: Absolutely. A developing area, will continue to develop and this is kind of helpful insights in helping companies articulate and develop their response. Alan, can I just flick that question to you from a sustainability perspective. Is the GRI standard enough in that broader context?

Alan McGill: I think you’re right, and clearly Andrew mentioned it in his opening. Someone like the World Economic Forum and the IBC have been looking at that issue of trying to move towards some common metrics for all organisations, but again doing it across that broader landscape so that it is holistic. And whether you talk about the principles for governance, the people planet which are the other three pillars, alongside the prosperity one - prosperity is clearly much broader and wider than just the tax agenda. So the question is again, how are you integrating what you are doing around the tax and the tax reporting, the strategy, the payments, you know all of that sort of information, into that broader sort of prosperity or sort of more perhaps traditional economic arm of you know the ESG agenda. And it’s that way in which again that I think the integrated story of how tax fits into that particular holistic picture of where the company is, what it is doing, what contribution it makes becomes really important for, you know, basically those different sort of stakeholders that the companies obviously wanting to both connect with, and engage with in terms of that sort of debate that they want to have. Therefore I think that realisation of the fact that actually you know most businesses, well not most, all businesses do operate in a sort of multi-capital environment and that if you just focus around one particular capital, being financial capital, and historically the sort of profit and loss that the organisation made, then you’re missing these broader contributions and these broader capitals that you actually impact upon. Then you’re missing, you know I think, the move of where businesses are needing to move to in terms of what you might call a megatrend on overall corporate reporting, as that move is going towards a sort of broader understanding across how it impacts those broader capitals.

Janet Kerr: Fascinating and lots of angles coming out of this discussion. I’m conscious of time, I’m going to pick one last question that’s come in. It’s quite simple and it just says - where do I start? You know, so I think I read into that, somebody’s thinking about doing something around tax transparency but where do you begin? Dave, can I put that one to you from a kind of practical perspective?

David Murray: Yeah, I think it’s a really good question and it’s really difficult, and notwithstanding all the things I’ve said about doing your thinking internally first. Transparency is a journey, it’s not an immediate switch that can be flicked or sort of an end statement you get to where you can put your tools down and say we’ve done this, we’ve done a good job and we can focus on something else now. It’s taken us years to get to where we’ve got to and our transparency agenda included publishing a huge amount of information on our tax profile, some of that mandatory but much of it voluntary, it’s all of cumulative. And nothing gets scaled back, you can never take a step back - you know, once you’ve put something out you have to keep putting it out.

So I’ll tell a little two minute story, or maybe even less than that, on where we started. It was all the way back in 2013. We started publishing these country tax sheets and a tax fact book to better inform investors and that was wholly voluntary. And then in 2014, we had to add in for Australia because there was mandatory information available in Australia. For 2015 that actually became mandatory, sorry we started it in 2014, a year ahead of when we knew was going to become mandatory. And I think it was at that point, 2015, the group really started painting a really comprehensive picture of our tax affairs, moving from the fact books to what I would call our PwC award winning tax and economic contribution report that gave a much more comprehensive overview of our entire value chain. But then in 2016, that was on the slide, you know project by project payments under the EU Accounting Directive had to be published, separate reporting new reporting in Canada. And every one of those things that you have to publish, you have to make sure it reconciles and supports what you are already saying which invariably means you need to say more about them than you’re already saying. So you expand and we expand our tax and economic contribution report every year. And then we had the UK tax strategy requirements come in, and for the last couple of years we’ve really tried to revamp the tax strategy to make it a lot more comprehensive. We’ve committed to implementing GRI 207, we’ve started publishing our OECDs in ECR but we still need to get to the point where we’re doing both of those in unison. And it’s a journey that you have to go through, you have to start somewhere.

And I remember, I know I’ve looked at the attendees on this call, and some of you will know my boss and you’ll smile when I say this. But an old boss I had always used to say that the best time to plant a tree was 20 years ago, but the second best time is today - and that’s always sort of stuck with me. You need to take that first step somewhere and it’s going to be really hard and it’s not going to pay immediate dividends. It’s going to be, you know the first year you do it, you’re going to be told you’re not doing enough, and probably that’s the case for every year you do it. You’re always going to be told it’s not enough but over time you can build it up and make it into something really powerful that you can stand behind.

Janet Kerr: Yes, absolutely. One of those things that kind of does build. Alan, any quick comments from you on the ‘where do I start’ piece?

Alan McGill: Yeah, I think the key thing around that is just to start with the payments that you’re actually making, obviously. Collect those, set the boundaries around actually which taxes you want to incorporate and include within that and then from there start to think about Board engagement. And that’s a key thing as well, which is that you do need to get the Board involved and the Board engaged on this particular agenda. And to get them to understand again the relative importance and the critical sort of nature of that information, and the way it’s then going to be then potentially communicated from an external perspective. But without the Board and that Board engagement and that overall sort of governance piece, then quite frankly, it’s going to be a real struggle to do anything internally within the organisation.

Janet Kerr: Yep, indeed. And Andrew, let me ask you that question and then, conscious of time, pass back to you for the kind of closing comments.

Andrew Packman: So, thank very much and thank you to Dave and to Alan for their insights this morning. I suppose, for me, the only thing I would add to all of that is the need to build consensus within the organisation, and echoing what David was saying, not thinking one can build Rome in a day.

In my experience, there is very often a spectrum of views within an organisation around the right approach to these issues. And simply there is a need for discussion and time to be spent, and perhaps to take a first step to see what response that receives, and not to jump to the view that what others have done is necessarily right for your own organisation. But to start from the questions of the understanding of your own tax profile, the understanding of what people are interested in and then, again as David was saying, what is your message? What are you trying to say? What do you think are the key things which need to be communicated? In a world where there is a blizzard of information, clarity of expression and brevity do have their part, in my view, and I don’t think a huge document is necessarily the right answer for everybody. It may be right for some, but I think for others there may be a smaller data set with a clarity of message which would be helpful.

So ladies and gentlemen, it’s just coming up to 10.00 o’clock in the UK. Thank you very much indeed for joining and can I just thank Janet, David and Alan for their participation and their insight this morning. Our view of this is simply to try to be helpful to companies as they think about their approach. If you do have any questions around any of these questions, please do get in touch with Alan or Janet or me and we would be delighted to help. Thank you very much indeed for your attention, and I hope you enjoy the rest of your day.

Thank you very much.


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