Tax and payments to governments play a vital role in enabling the achievement of the Sustainable Development Goals (SDGs). Alongside other voluntary initiatives, it is through tax and payments to governments that companies—big and small—contribute to society.
Recent tax-related scandals, such as the release of the Panama and Paradise Papers, have led to a public debate around the world and a growing demand from investors, civil society, media and governments for more information on how companies approach taxes. To address this information need, the Global Sustainability Standards Board (GSSB), the independent standard-setting body of the Global Reporting Initiative (GRI), launched a project to consider creating a new reporting standard aimed at promoting greater transparency around a company’s approach to taxes. Last week, it published the draft standard for public comment.
“Stakeholders need and expect consistent, quality information about tax and payments to government in order to have an informed public debate around questions of equity, fairness and acceptability of tax approaches,” says Judy Kuszewski, chair of the Global Sustainability Standards Board. “Tax revenues and their application are essential to society’s ability to deliver on the Sustainable Development Goals. Likewise, tax transparency promotes trust and credibility in the taxation system and in the tax practices of companies. It enables stakeholders to make informed judgments about whether a company’s position on tax and payments to governments reflects society’s priorities and creates a reliable basis for decision-making.”
The current state of public tax reporting leaves much to be desired. A recent study by RobecoSAM indicated that only 17 percent of 830 companies surveyed were reporting publicly on tax payments at a country level, and most of these were only operating in a single country.
This number is anticipated to increase significantly. Eighty percent of respondents in a recent OECD Base Erosion and Profit Shifting (BEPS) survey by Deloitte, targeting tax and finance managers and executives from multinational companies in 38 countries, said they expect public country-by-country reporting to be adopted globally in the next few years. GRI’s proposed tax standard aims to take a major step towards enabling such reporting by setting out common, well defined disclosures related to tax strategy, governance, control, risk, and stakeholder engagement, as well as country-by-country reporting of income, tax, and business activities.
“As the global standard-setter for ESG reporting, GRI is uniquely positioned for this pioneering work," Kuszewski adds. "The multi-stakeholder approach led by GRI’s independent Global Sustainability Standards Board allows a consensus position on transparency to be developed through the collaboration of all relevant stakeholder groups, exclusively in the public interest. This approach guarantees a globally acceptable standard that enables vital societal dialogue to address global sustainability challenges. We invite all interested stakeholders to engage during the upcoming public comment."
Previously published on 3BL Media News.
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The Global Reporting Initiative (GRI) is an international, multi-stakeholder and independent non-profit organization that promotes economic, environmental and social sustainability. The GRI was established in 1997 in partnership with the United Nations' Environment Programme (UNEP).