The tax transparency debate continues to gain momentum. Stakeholders are demanding more meaningful information on tax, resulting in some companies opting to publish comprehensive tax disclosures. More and more stakeholders and the public at large want to understand a company’s approach to tax and how much tax it pays. This can only be demonstrated through the information they communicate.
More than ever before, it is clear that tax can be used as a powerful indicator of a company’s societal impact and its broader corporate values. But more can be done to achieve this.
PwC’s 2024 Tax Transparency report benchmarking the tax disclosures of companies listed on the main market of the Irish stock exchange, Euronext Dublin, reveals that half of companies reviewed voluntarily published a tax strategy – a document that sets out a company’s policies for the management of its tax affairs. Some 40 per cent of companies explicitly stated that their tax strategy was regularly reviewed, and 90 per cent of companies describe how their tax governance and control framework is monitored.
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Tax disclosures continue to be redefined by the introduction of mandatory disclosure regulations such as public country-by-country reporting and the corporate sustainability reporting directive (CSRD). Tax is becoming central to the broader environmental, social and governance (ESG) agenda and is an increasingly important sustainability matter. There is no sign of these trends abating and multinational organisations, in particular, must now navigate a diverse range of tax disclosure requirements.
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While there is no requirement in Ireland for companies to publish a tax strategy, the report reveals that 50 per cent of companies reviewed voluntarily publish a tax strategy and this is similar to previous years.
Trust can be built by companies that adopt a strategic response to tax disclosure
Indicating a strong level of oversight on tax matters, all companies confirmed that their board or audit committee is accountable for compliance with the tax strategy.
And although the majority of their board or audit committee formally reviews the tax strategy at some stage, just 40 per cent of companies explicitly stated that their tax strategy was regularly reviewed.
Some 90 per cent of companies include a statement in their tax strategy describing their tax risk appetite, up 29 per cent from last year.
About 80 per cent of companies referenced tax in their broader sustainability reports, up 14 per cent from last year and an acknowledgment by companies that tax is an important sustainability metric.
There was a 29 per cent increase in the number of companies that explain how tax aligns with their business strategy, demonstrating that tax is driven by commercial activity.
Consistent with prior years, all of the companies describe their approach to engaging with tax authorities.
A fifth of companies voluntarily disclosed some details of their total tax contribution (TTC) information at a jurisdictional level. TTC is the total amount of taxes paid by a company, including taxes borne by the company and taxes collected on behalf of the exchequer.
TTC disclosures show how much tax a company contributes to the economy, thereby demonstrating its broader societal impact.
Trust can be built by companies that adopt a strategic response to tax disclosure. The survey shows that more can be done using tax disclosures to highlight a company’s role in society and to influence stakeholders’ perceptions of its sustainability credentials.
Navigating the tax transparency landscape can be challenging. Businesses have to consider stakeholders’ expectations and assess compliance with diverse regulatory and voluntary reporting requirements. There is no optimal level or one-size-fits-all approach to tax transparency. Each company’s perspective is different and will be driven by several factors, including its brand values and stakeholder interests.
Aidan Lucey is a tax transparency partner at PwC Ireland
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