By Robin Hodess
Director, Governance & Transparency, The B Team
When we launched The B Team Responsible Tax Principles a year ago, the timing seemed right. The context for addressing corporate tax was changing in a way that supported the basic premise of the work—to ensure that corporate tax practice was aligned with company purpose and the social license to operate. But a wider range of stakeholders was taking a renewed interest in corporate tax and its link to sustainability as well. Now in 2019, the conversation on corporate tax has reached new spaces and places, making The B Team’s focus on responsibility in tax especially welcome.
Recently, there have been calls from Davos and beyond for responsible tax behaviour in the context of growing economic inequality and further linkages are being drawn between corporate tax and the quest for social responsibility and trust in institutions, including business. At the same time, digital taxation is on the minds of many including its implications for the broader digitalisation of the economy. Taken overall, the issue of tax has become a core piece in the accountability of corporations to society.
Renewed popular attention to tax comes amidst longer-term, international efforts to reform tax, as a means to reduce evasion and avoidance—and to answer deeper questions about whether companies are paying their fair share of tax. At the same time, as the world increases demand for sustainable growth, it is widely accepted that tax is key to development. Multinational corporations’ payments to governments, specifically taxes paid in developing countries, are a crucial element in financing the Sustainable Development Goals (SDGs) alongside strengthening tax systems.
Importantly responsible tax is no longer an exception, but an expectation for consumers and employees. The public and internal pressure on companies following the Panama and Paradise Papers scandals has reached a critical mass. The mass decline in trust they fueled is directly guiding the public’s choices and consumption. In the United Kingdom, 69 percent of the public would rather shop with a business that can prove it pays its fair share of tax and 70 percent would rather work for a business which can prove it pays its fair share of tax.
At The B Team, responsible tax and improved tax systems also provide a foundation for the other challenges we tackle. Countries cannot develop and implement ambitious climate change policies and action without reliable tax revenues. Without action on tax, social and economic inequality will only continue to worsen. For the health and prosperity of the next generation, we cannot afford to remain silent and inactive on responsible tax.
When The B Team first brought companies, NGOs, investors, and tax authorities to the table to talk corporate tax, we didn’t know what to expect. Would distance, fear and distrust prevent productive exchange?
These critical ongoing dialogues help us support companies in bringing the Principles to life, and enrich the benefits of doing so with deeply examined and refined broad stakeholder expertise. While we did not go as far in every area as was demanded at times, we came up with a set of seven Principles that these companies could get behind and drive both internally and externally. The Principles have proved a powerful, useful way to harness company commitment and create a space for further action. We hope to use this momentum to continue deepening this work as a group and within each company.
Since we launched our Responsible Tax Principles at the First Global Conference of the Platform for Collaboration on Tax, 12 companies have endorsed them and many more have engaged and expressed interest. The companies in our working group have shared learnings, while challenging each other to raise ambition and deepening discussions with NGOs and investors on topics such as reporting and board governance of tax. As new companies come on board, we will continue our commitment to productive and constructive dialogue with stakeholders, including Global Reporting Initiative, Domini Impact Investments, Norges Bank, Oxfam, KPMG, OECD, Tax Justice Network Africa, ActionAid, Christian Aid, ONE and more.
We’ve also shared our findings and insights at major events and platforms including the PRI in Person and the UN Forum on Business and Human Rights. One year on, we want to get the word out on lessons learned from tax reporting, hoping to demonstrate what good looks like to other companies wanting to take courageous leadership on responsible tax.
Among our endorsing companies, Vodafone, Allianz and BHP have made new disclosures and significantly expanded their tax reporting this past year—raising the bar even higher. While Vodafone has reported on tax on a country-by-country basis since 2011, its breadth of narrative reporting in relation to data reporting has increased greatly, including in its Taxation and Economic Contribution Report 2018.
Allianz published its first Tax Transparency Report in early 2018 with a focus on highlighting its internal control mechanisms and its approach to tax planning. With this report, Allianz has developed a process of internal automation and hopes over the next three years to be able to build on this content. BHP disclosed for the first time in 2018 details of profits and number of employees for key countries including Australia, Chile, US, UK and Canada, which cover 97 percent of its profits and employees. It also published effective tax rates for Australia, Chile, US and Canada.
These steps forward are encouraging. It is our hope that company leadership on responsible tax inspires others to act, showing what is possible. As corporate tax discussions gain visibility and momentum, in circles as that reach from boardrooms to tax professionals to the broader public, it is important to recognise emerging commitments and bold steps to improve the status quo on corporate tax policy and practice. These can get lost in the debate and shuffle.
At The B Team, we’ll continue to bring companies together and aim to bring fresh perspectives — especially from civil society and tax authorities—to evolve and strengthen the Principles and to make sure they stay current with the evolving and relevant debates. We’ll also encourage the companies who are engaged to address crucial tax issues head-on, including reform of the international tax system, the arm’s length principle, the sustainable development implications of tax and digital taxation.
The work on the Responsible Tax Principles has been some of the most exciting I have done in my first year at The B Team. And while the momentum building around these efforts is significant, we still have our work is still cut out for us. The good news is that companies are raising the bar on what best practice in responsible tax looks like, sharing their experiences to forge the way ahead for others. The changes we’re seeking won’t happen uniformly or overnight, but with the support and leadership of Responsible Tax Principle signatories, we are on the right road.
As we reflect upon the first year of the Responsible Tax Principles, we are proud of our work to raise the bar on company tax policy and practice, but this moment is one to renew our ambition rather than to celebrate. Tax is at the heart of some very critical societal discussions on growing inequality and there are stronger calls than ever for corporate tax to be responsible as part of any solution. Corporate tax is key to accountability. We see the value of dialogue and action and seek to support both as we move ahead.
When we first launched our Principles, B Team Leader and Safaricom CEO Bob Collymore issued a challenge to his peers, “It is time for the private sector to recognise that the most critical asset a company can own is trust.” Tax is an essential building block for trust. We call on companies to answer Bob’s call.