Building Public Trust Through Tax Reporting 2024

More South African companies need to improve tax transparency reporting to unlock greater value

Companies have never been subjected to as much scrutiny from the public and their stakeholders as they are today, placing more pressure on business leaders to build trust, make an impact and remain accountable. One way of doing this is by prioritising your company’s tax transparency which can help address a trust deficit—if one does exist.

In PwC South Africa’s ninth edition of our Building public trust through tax reporting publication, we review the tax transparency efforts of the top 100 companies listed on the Johannesburg Stock Exchange (JSE). We examine common challenges faced by tax executives in the reporting landscape and present a unique perspective on tax transparency on the African continent.

“Tax has become an important part of the broader sustainability and corporate social responsibility discussion,” says Carla Perry, PwC South Africa Tax Reporting & Governance Associate Director. “However, the state of sustainability reporting is still in flux, and tax, in our view, is an increasingly material consideration. To maximise the benefits of good fiscal reporting, companies need to invest in a robust tax governance framework and technology. In doing this, organisations can gain a comprehensive view of their tax environment and total tax contribution, which enables them to have a full understanding of the taxes borne and collected through the value chain of the business.”

The crucial role of tax transparency

Tax transparency extends beyond mere compliance with tax laws and regulations. It plays a crucial role in building trust, managing risks, ensuring good governance and contributing to the economy. By voluntarily disclosing public information, organisations can tell their tax story and provide stakeholders with a clearer understanding of their tax practices and policies.

Our assessment of the top 100 JSE-listed companies was based on PwC’s Tax Transparency Framework which we believe provides a good benchmark and offers clear and comparable measuring criteria for companies. It focuses on four key areas:

1. Context: This gauges how well an organisation communicates on tax. In essence, is there effective tax transparency through easily accessible tax-related disclosures, integrated with other company disclosures, that highlight the importance of tax transparency and supported frameworks
2. Tax Strategy and Risk Management: This looks at whether a company provides disclosures outlining the company's tax strategy, addressing tax as a business risk, and detailing tax risk management, governance, reporting, oversight, and controversy, with a focus on stakeholder engagement and tax's role in ESG.
3. Tax Numbers and Performance: This assesses numbers further than IAS12 requirements. Here, we are looking for disclosure of key financial indicators, comparing the effective tax rate to the cash tax rate, explaining tax incentives, providing clear rate reconciliation, adjusted tax rates, and future tax rate performance.
4. Total Tax Contribution and Wider Impact: This assesses disclosures detailing jurisdictions, entities, and primary activities, total economic contributions by tax type and jurisdiction, other economic contributions to government, and the broader impact of tax on value creation and corporate citizenship, including alignment with Sustainable Development Goals.

Tax transparency performance among the top 100 JSE-listed companies

The average overall tax transparency score among the top 100 JSE-listed companies for 2023 is 29% (as seen in Table 1). There were slight variations in category scores, however the level of tax transparency remained the same as in 2022. Fifteen companies attained a score of more than 60%—11 of which are primary listed, and four of which are secondary listed companies. More than 60 (2022: 70) companies attained a score of 30% or less for total transparency, and this indicates that even though the overall score attained by companies remains the same from the previous year, it appears that more companies are embarking on a journey towards greater tax transparency.

Table 1: A three-year overview of average transparency in South Africa per category of the Tax Transparency Framework – all companies

The best-performing company fell within the financial sector, while on average, the telecommunications sector consistently provided the most effective tax transparency (as seen in Table 2).

Out of the 20 top-performing companies, ten are in the basic materials sector, four are in the financial sector, two are in the telecommunications and technology sectors, and one each in the energy and health sectors.

Table 2: South Africa – minimum, average or maximum score out of a possible 80 points for total tax transparency per sector (Scores are indicated as a minimum, average or maximum score out of a possible 80 points.)

South Africa’s tax transparency landscape

While tax transparency disclosure is not mandatory in South Africa, the JSE has released sustainability disclosure guidance that includes tax reporting. This aligns closely with the requirements and recommendations of GRI 207: Tax 2019 (GRI 207). 

To provide more value to your clients and stakeholders, and consistently differentiate your organisation in today’s market, tax executives need to have a multilayered understanding of their organisation. “In order to identify and manage tax risks, they need to grasp the company’s business model, which includes revenue streams, cost structures, and market dynamics,” Perry says. “They also need to have their finger on the pulse when it comes to making strategic decisions, and must be able to untangle the intricate way in which internal functions interact—often across borders as with global tax regulation and non-financial reporting requirements, it is necessary to understand what is on the horizon.”