Annual survey of tax transparency policy in Dutch companies
The Tax Transparency Benchmark of the Dutch Association of Investors for Sustainable Development (VBDO), which is conducted in cooperation with PwC, has been won by NN Group for the third year in a row. The financial services provider scored 32 out of a total of 35 points and was praised by the jury for its extensive tax strategy, internal control processes and risk analysis, and the provision of tax assurance by an external auditor. Philips, which finished second with 31 points, received an honourable mention from the jury for the progress the company has made and the quality of its tax reporting. Aegon, KPN and Randstad shared third place, all three with a score of 30 points.
Tax transparency needed in current climate of corporate social responsibility
The Tax Transparency Benchmark examines the transparency of 77 Dutch listed companies on their tax policies and the quality of their tax governance. Despite the stricter assessment of this year’s jury, the results of the benchmark show an overall upward trend in the tax transparency of companies. Since the introduction of the Benchmark in 2015, the average score based on the total points achieved on the six principles of good tax governance has increased from 25 percent in 2015 to 51 percent in 2021. The stricter assessment fits with the growing awareness that tax transparency is needed in the current climate of corporate social responsibility.
The jury also calls on companies to see tax as part of their ESG strategy and to report on it.
More and more companies are switching from 'tell me' to 'show me'
The benchmark shows that companies are particularly transparent when it comes to publishing their tax policy or principles and identifying tax risks. For example, 84 per cent of the 77 companies have a tax strategy and 75 per cent report on tax risks. By applying the GRI 207 standard and the future application of the CBCR directive more and more companies are reporting on a country basis. However, not all companies show a complete breakdown by country or tax category. In addition, external tax assurance and tax-in-control framework reporting lag behind the upward trend.
The overall assessment of the jury is that several companies have made significant progress in providing transparency in their tax reporting. Many companies are clearly providing more insight into their tax policy. The benchmark also reveals some areas for improvement. Simply naming ('tell me') elements is no longer sufficient for a high score. The implementation of tax policy, the concrete application of a governance model and reporting with concrete examples and tax dilemmas ('show me') are becoming increasingly important. The jury calls on companies to see tax as part of their ESG strategy and report on it.
There is still a clear difference between companies that publish their tax strategy ('tell me') and companies that also report in detail on their tax governance using relevant case studies ('show me'). The jury also calls on companies to see tax as part of their ESG strategy and to report on it.
Given the increasing importance of ESG, the expectation is that the upward trend in tax transparency will continue in the coming years and that more and more companies will make the step from 'tell me' to 'show me'.
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