NN Group wins Tax Transparency Benchmark 2020

03/12/20

KPN and Shell come in second and third place

The Tax Transparency Benchmark of the Association of Investors for Sustainable Development (VBDO) in cooperation with PwC Netherlands was won by NN Group for the second year in a row. The jury of professional experts compliments the financial services provider on its comprehensive tax strategy, internal control processes and risk analysis and the provision of third-party tax assurance. NN Group scores 32 out of the maximum of 35 points to be scored. KPN and Shell, each with 28 points, come in second and third place, based on the expert jury’s assessment.

Rising demand for tax transparency

Although the Tax Transparency Benchmark analyses the annual reports for 2019 of the 77 participating Dutch companies, it cannot be denied that the outbreak of the COVID-19 pandemic at the beginning of 2020 has had an enormous impact on almost every aspect of doing business and including on taxes and tax transparency. Countries have engaged in massive public spending in order to mitigate the negative economic impact of the Covid-19 pandemic. This has further fueled the public debate on tax. Many senators and members of parliament have called for the COVID-19 recovery support packages of the government to be accompanied by greater transparency, including for tax, and public country-by-country reporting. Several other European countries, such as Belgium, Denmark, France, Italy and Poland, have introduced fiscal conditions to COVID-19 recovery state support packages further limiting bailout money for businesses that are registered in tax havens.

The increased debate on tax transparency has not just been generated by worsening budget deficits due to the COVID-19 pandemic. It also stems from the growing realization that taxes are needed to fund sustainable growth as proposed in the EU’s Green Deal and the net-zero emissions commitments made by governments and corporations. Modern society no longer sees tax as just a cost factor, but also as an instrument to create socio-economic cohesion, environmental value creation and long-term prosperity.

What is the main driving force behind voluntarily providing more tax transparency for companies. Is it predominantly a tool for risk mitigation and reputation management, or is it a goal in itself and is there an intrinsic motivation to engage in meaningful stakeholder dialogue?

Tax Transparency Benchmark 2020 jury's assessment

Benchmark exposes areas for improvement

Overall, the results of this year’s Benchmark show that Dutch stock-listed companies are again more fiscally transparent than before. Since the introduction of the VBDO Tax Transparency Benchmark in 2015, the average transparency rating based on the total points obtained by companies on our six principles of good tax governance has increased from 25 percent in 2015 to 46 percent in 2020. Nevertheless, there remains considerable room for improvement as to the extent and quality of disclosure of country-by-country reporting, the provision of internal and external tax assurance and the narrative regarding the reconciliation of the statutory with the effective tax rate.

The expert jury - Hans Gribnau (Leiden University and Tilburg University), Irene Burgers (Groningen University), Klaas Bangma (FNV), Anna Gunn (Artikel 104 and Leiden University), Michiel van Esch (Robeco) and Victor van Kommer (IBFD and Utrecht University) - calls on companies to not only disclose their tax payments to governments but also report any tax incentives and subsidies they have benefited from. Although this jury assessment was made based on FY 2019 reports, the jury did expect companies to pay attention to the key tax issues that have dominated the news in the past year, such as the proposed ‘exit tax’ and the introduction of EBITDAC (earnings before interest, taxes, depreciation, amortisation and COVID-19) in The Netherlands and the growing EU-level influence on tax legislation.

The jury’s overall verdict is that several companies, in particular Shell, have made significant strides in providing more transparency in tax reporting. However, due to the progress that these frontrunner companies have made, the gap between high and low scoring companies is getting bigger. There is a distinct difference between the companies that publish their tax report according to the letter of the law (i.e. ‘tell me’) and companies that also report in more detail on their tax governance by using concrete and relevant examples (i.e. ‘show me’). In the view of the jury, this raises questions as to what the main driving force behind voluntarily providing more tax transparency is for companies. Is it predominantly a tool for risk mitigation and reputation management, or is it a goal in itself and is there an intrinsic motivation to engage in meaningful stakeholder dialogue? This is a discussion that will only gain in importance in the post-COVID-19 era.

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Edwin Visser

Edwin Visser

Partner, PwC Netherlands

Tel: +31 (0)62 294 38 76

Keetie van der Torren-Jakma

Keetie van der Torren-Jakma

Director, PwC Netherlands

Tel: +31 (0)61 856 59 73

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