In the current economic environment, the priority for governments worldwide – and Western governments in particular – is for their tax systems to generate the level of revenues they expect. This focus is reflected in a strong public sentiment that everyone should ‘pay their fair share’. Inevitably, ‘everyone’ is often defined in popular parlance as large corporations. And asked whether corporations are paying their fair share of tax, growing numbers of people appear to believe – rightly or wrongly – that the answer is "no".
Against this background, the media, politicians and NGOs worldwide have engaged in a sometimes heated debate about the ethics and legality of various multinationals’ tax policies, often with significant impacts on the reputations of the companies concerned. And the knock-on effects go much further. Our client conversations and 16th Annual Global CEO Survey both confirm that tax has moved up the agenda of business leaders around the world.
There are several reasons for this. Companies are not only concerned about an increasing tax burden, but are also aware of changing public attitudes that are threatening to evolve into even more stringent tax regimes. They also know that their tax policies – even if perfectly legal – can now present significant risks to their corporate reputation. So tax issues need to be considered, discussed and communicated more carefully than ever before.
This broad requirement can be divided into five key imperatives that we’re encouraging our clients worldwide to meet. The first is to understand the differing perspectives and priorities of their various stakeholders – from investors to customers, and from media to governments.
The second is to set a clear, comprehensive and explicit policy on all aspects of tax planning, discussed and agreed by the board.
Third, companies need to decide whether greater transparency around their tax affairs is appropriate – and, if so, how best to communicate the key messages.
Fourth, they should decide the extent to which they want to get involved in the public debate over domestic and international tax: this is not an area where the maxim ‘any publicity is good publicity’ always applies.
Fifth – and most important – they need to avoid surprises. Across the world, legislation and social attitudes around tax are in flux, and companies need to monitor these carefully and to constantly stay ahead of events.