For the fourth consecutive year, we assisted VBDO in conducting the Tax Transparency Benchmark. On this website we present the results of the 2018 edition, in which 76 Dutch companies are ranked on the level of transparency they provide on tax. The aim of the benchmark is to enhance the existing understanding of corporate tax responsibility and to inspire how to communicate comprehensively on tax matters in publicly available documentation.
The average transparency rating of the companies in scope increased from 36% in 2017 to 39% in 2018. This is a positive trend but also shows that there is still quite some ground to cover as the average score is still below 50% of the total points. Furthermore, we are content to report that 68% of the companies provided feedback on their own results. The companies that provided feedback are mostly companies that scored higher on the benchmark.
|4||Van Lanschot Kempen||ASCX||22|
|8-11||ING Group B.V||AEX||20|
|30-32||Royal BAM Group nv||AMX||15|
|33-36||Signify (former Philips Lightning)||AEX||14|
|41-42||Aalberts Industries N.V.||AEX||12|
|55-56||BE Semiconductor Industries N.V.||AMX||7|
|58-62||Air France KLM||AMX||5|
Sif Holding N.V.
|63-67||Kiadis Pharma N.V.||ASCX||4|
|63-67||Koninklijke VolkerWessels NV||ASCX||4|
The winner of the Tax Transparency Award 2018 is Aegon. This company is the top-scoring company in the benchmark and scored above average on all good tax governance principles as published by VBDO and Oikos in 2014. One of the complimented items was that Aegon partially published country-by-country information, such as information on FTE’s and earnings before income tax. Further, Aegon provides a detailed description of how the implementation and execution of the tax strategy is monitored.
As mentioned in last year’s Tax Transparency Benchmark, the developments surrounding transparent reporting are moving fast. In this context, it was mentioned that VBDO would conduct a thorough overhaul of the Tax Transparency Benchmark methodology for the 2018 benchmark, including the feedback received from many of the participating companies. This resulted in a significant change in the methodology compared to last year, which also implies that a proper comparison with the average transparency rating of the companies in scope with last year’s benchmark cannot be made. Below, we outlined the most significant conclusions and recommendations for each principle of good tax governance, as published by VBDO and Oikos in 2014. In addition, the table below provides an overview of the percentage of companies that scored per principle of good tax governance.
|Good Tax Governance Principle||% companies that scored per principle|
A. Define and communicate a clear strategy
B. Tax must be aligned with the business and is not a profit centre by itself
C. Respect the spirit of the law. Tax-compliant behaviour is the norm
D. Know and manage tax risks
E. Monitor and test tax controls
F. Provide tax assurance
Although most of the companies communicate their view on tax via a tax strategy and/or policy, there is room for further improvement in communicating that the tax strategy is aligned with the organisational values, the business strategy and the sustainability strategy to show stakeholders that tax is not seen as an isolated business component.
Furthermore, we would like to encourage companies to provide evidence to stakeholders that the approach to tax is discussed and approved at board level by being transparent on the sign off of the tax strategy by the (executive) board.
We noticed that only little country-by-country information is provided, while this could provide stakeholders with relevant insights in the company’s scale of activity and its approach to taxes and payments to governments across the tax jurisdictions in which they operate.
Furthermore, we recommend companies to add a narrative description to the effective to statutory tax rate reconciliation to provide (non-tax specialist) stakeholders with more background on the difference between those two.
Although most of the companies have a whistleblower policy in place, we recommend companies including a special paragraph relating to taxes in their whistleblower policies, to ensure that employees and stakeholders can report concerns about unethical or unlawful tax-related behaviour and/or activities that compromise the company’s integrity in relation to taxes.
Furthermore, to ensure stakeholders that the company’s tax strategy is effectively embedded in the organisation, we recommend companies to report on training programmes in place for employees on how to deal with tax (dilemmas).
To provide stakeholders with a better understanding of the potential and actual risks involved and how these risks are managed within the organisation, we recommend companies to elaborate more detailed on tax risks, including their tax risk appetite and risk response, in publicly available documentation.
From a tax risk management perspective, it is crucial that tax relevant data is correct and complete. Technology can be used to improve the management of tax relevant data and therefore, we recommend companies to communicate on this topic as well.
By communicating on the monitoring processes, the stakeholders are informed on the proper execution of the tax strategy and whether the company is in control of tax. In this respect, we note that there is quite some ground for improvement.
Communicating about the (external) review of your tax function provides additional comfort to stakeholders. This could be done by communicating on increased board involvement (tax in-control statement), implementing checks and balances with the tax authorities (co-operative compliance program) or supervision by a third party (third party tax assurance).
Director, PwC Netherlands
Tel: +31 (0)88 792 14 60
Evita van der Aar-Melger
Manager, PwC Netherlands
Tel: +31 (0)88 792 70 59