A current challenge for the tax professional is to identify the right balance when planning for taxes. On one side of the balance, taxes are a significant cost to the corporation and should be controlled and managed in the quest to create shareholder value and maximize earnings per share. On the other side, the amount of tax paid by large corporations is coming under increasing scrutiny and public debate.
The proposition being put forward by some is that large companies are not paying their fair share in taxes and therefore there is an increased tax burden on others, including individuals, to fund spending on social investment. Tax benchmarking is one way of helping to judge this balance. It allows corporations to identify how much they are paying compared to other companies in the industry. It may highlight a high tax rate which could be due to lack of efficient control and management of the tax function. Conversely, it could highlight a low tax rate compared to the peer group which could be due to a tax strategy which, if successfully challenged, could harm the company’s reputation and weaken the brand.
This study took 46 of the leading global chemicals companies from the fine, basic, bulk, specialty, and petrochemicals sectors—companies are listed in the Appendix. Within the sample, 23 companies were US based, 6 from Germany, 5 from Japan, 3 from the Netherlands, 2 from China, Switzerland, Canada and France, and 1 from UK. This report summarizes the findings from benchmarking key financial indicators for tax for the last 3 years. All information is taken from publicly available financial statements spanning the period January 2003 to September 2006. (Nine companies in our sample have non-31 December year ends and their 2006 data is included. The data for these companies over the 3 years ending in 2004, 2005, 2006 is shown as 2003, 2004, 2005 respectively.)