In the age of transparency, responsible tax behaviour is increasingly becoming an unavoidable issue for companies. Building on the wider trend towards a fairer international tax system, CSR Europe, together with PwC Netherlands and Accountancy Europe will launch a ‘Blueprint on Tax Transparency and Tax Responsible Behaviour’ on 21 March 2019. On the occasion, we interviewed Signe Schans Christensen, Tax Counsel at Maersk, to share her insightful views on responsible tax behaviour.
- What are the best enablers to get more companies to become responsible tax payers?
Maersk thinks long term and values when doing business. That is why we decided to support the responsible tax agenda early on, at a time where the discussion about transparency and ethics when dealing with tax was considered controversial by many.
Historically, it has been a norm to treat tax purely as a cost to be reduced. However, today’s expectations with respect to companies and their responsibility are different and calls for a more responsible way of managing tax. An increasing number of businesses have picked up the baton.
To some companies the enabler to manage tax in a responsible way is value-based – they want to do what they believe is the right thing. Other companies would perhaps not regard tax as a value regulated matter. For such companies, financial risk mitigation is the enabler. Today, there can be a significant reputational risk associated to what is perceived as aggressive tax planning. Reputational damage may erode a customer or investor base and reduce chances to contract with certain types of partners, such as governments.
Also, there has been a global upgrade of tax legislation. General anti-avoidance rules have been implemented in most countries, in the EU directives and in the double tax treaties to counter aggressive tax planning. Tax authorities and courts in many countries now have access to challenge and sanction transactions and structures without business purpose, which are designed only to save tax. This increases the risk of audit, litigation, interest and penalties and the need to close-down tax driven structures. All this can be time-consuming and expensive. CEOs and CFOs dislike uncertainty and difficulty when quantifying risks - and every business understands such a cost-benefit analysis.
Maersk joined The B Team who released ‘The Responsible Tax Principles in 2018 at the United Nations in New York. Several of the companies engaged in the development of the principles are in the extractives industry, which shows that this sector understands that good governance with respect to tax is an imperative. However, I do not think that this is a sector-specific issue, all sectors should in my view take the agenda seriously.
- Is there a business case in responsible tax?
Tax planning has been a way for business to create a level playing field between companies that are resident in different countries. For example, not all countries have the same amount of double tax treaties, which provide for protection against double taxation and guarantee dispute resolution.
However, I believe– due to the new legislative environment - that refraining from artificial tax planning is very likely to be an overall long-term cost-saver due to avoided controversy and reputational damage.
Interested in Tax transparency and responsible Tax behaviour, CSR Europe will be launching a Blueprint on Tax Transparency and Tax Responsible Behaviour on 21 March. To register click here