There is a great deal of attention for taxation among politicians and the public. Companies need to take account of countless international trends and initiatives, both tax and non-tax. The strategic role that taxation can play has changed significantly, and attention needs to be paid to the risk of reputation damage. The Tax strategy has become part of the licence to operate, meaning that it’s therefore no longer the exclusive domain of the tax department but of a broad group of stakeholders, and it’s now prominent on the boardroom agenda.
Taxation is gradually being placed more and more in the context of companies’ corporate strategy and sustainability commitments. Under pressure from multiple stakeholders, it’s being seen less as a pure cost item and also as a contribution to society and to achieving the United Nations’ Sustainable Development Goals (SDGs). As a result, directors and supervisors are also taking a hard look at their own tax strategy.
Modernisation of the international tax system is also proceeding apace. Multilateral guidelines serve, among other things, to prevent tax avoidance and are leading to increased tax integrity and transparency. Some companies limit themselves to the transparency required by law, such as sharing a Country-by-Country Report with the Tax authorities. Others go significantly further, publishing their tax strategy online and, for example, making an analysis of the Total Tax Contribution publicly available.
Companies often opt for greater transparency than required by law as soon as they know that stakeholders value it. To that end, they engage with a broad group of stakeholders, including supervisory directors, investors, employees, and clients. That also fits in with the trend in corporate governance: the company’s objective of creating value for shareholders is being broadened out into long-term value creation for stakeholders and for the community in which the company operates.
Tax governance enables companies to adopt a sustainable approach to taxation. It comprises the formulation of a long-term tax strategy, clear roles and responsibilities, and tax risk management. Finally, tax (transparency) reports are produced for which an independent party can provide assurance in order to increase value for stakeholders. Do you want to know more? Feel free to contact us for more information.
Director, PwC Netherlands
Tel: +31 (0)88 792 14 60