In recent years, the increased public scrutiny over how much taxes big multinational companies actually pay to national governments has put a new topic on the radar of sustainability managers: the concept of tax transparency and responsibility.
To respond to the recent scandals (e.g. LuxLeaks, Panama Papers, Paradise Papers, etc.) some companies have already started to voluntarily disclose additional information about their tax payments on a country-by-country basis and almost two thirds of the FTSE 100 decided to publish information on their approach to tax to prove that their tax strategy is aligned with their business values.
The coherence of tax behaviour with the wider corporate social responsibility strategy became even more important after the adoption of the Sustainable Development Goals (SDGs) by the United Nations in 2015. Tax responsibility is an essential element of the implementation of this new sustainability agenda, as proved by:
- The inclusion of fiscal policies as a means to progressively achieve greater equality under SDG 10 (Reduced inequalities);
- The explicit mention to the mobilisation of domestic resources to improve domestic capacity for tax and other revenue collection under Goal 17 (Partnerships for the goals).
With estimated global tax losses of around $500 billion a year due to tax avoidance, it is clear that the amount of taxes corporations pay - and where they decide to pay them - has a very strong impact on the implementation of this new global agenda. As a consequence, more and more companies are including the principle to pay taxes where profits are made as a fundamental element of their ‘good corporate citizen’ strategy.
But how can companies benefit from these new stakeholders’ expectations over their tax decisions?
Responsible tax behaviour for companies can:
- Safeguard your investments over the mid- and long-term
- Improve your position towards policy-makers
- Increase the credibility of your social corporate responsibility strategy
- Position your company as a front-runner and reduce adaptation costs
To explore these topics more in depth, CSR Europe recently launched a new project which allows its corporate members to understand where they stand in the journey towards tax responsibility through a new Self-Assessment Tool, and learn best practices from front-runner companies and other peers.