Building trust – Tax, as an integral part of ‘long-term sustainable value creation’ of companies and society in general, has taken root
With a heightened sense of urgency surrounding environmental, social, and humanitarian issues, there is an elevated sense of societal pressure on leading organisations and their governing boards to take action and reset. Business as usual, with a sole focus on profitability, has become obsolete.
Purpose-driven companies are reaping the benefits of a focus on their triple bottom line of people, planet and profit — positioning themselves for sustainable success. The time has come to focus, not on being the best in the world, but the best for the world. In other words, companies need to earn their ‘social licence to operate’ with public trust as the definitive currency. Furthermore, companies will need to report and deliver on their sustainability claims given the increased focus on transparency.
Many organisations are starting to demonstrate the interconnectedness across environmental, social and governance (ESG) issues and how these relate to their business strategies. At the same time, sustainability, and particularly ESGs, are being placed high on the board and CEO agenda . ESG integration requires leadership and an ESG transformation mindset. Board members and executives therefore need to ensure that this mindset is embedded across all levels of the organisation, including the tax function.
Companies operating in Africa are facing a complex tax landscape and vigorous scrutiny. Stakeholder engagement and strong relationships are key to finding clarity and certainty amid the complexity. We have often observed that transparency builds trust. Communicating an organisation’s contributions to the society in which it operates is one important way of building long-term trust with the public (people in the street, customers and media) and other stakeholders (employees, the board, suppliers and other business partners, NGOs, lawmakers and standard-setting bodies).
Furthermore, voluntary tax transparency is a way of demonstrating that an organisation actually does business in a sustainable and responsible way, as companies’ tax-paying practices are an integral part of the sustainability debate. As an important source of government revenue, taxes play a vital role in advancing the achievement of the SDGs. A company’s tax payments are therefore a way of compensating society for the institutions and services it has access to.
PwC supports this initiative to encourage and promote greater voluntary transparency in tax reporting. In this way we are able to demonstrate trends that are shaping the tax transparency landscape and recognise best performing companies that are using voluntary tax disclosure to tell their story, thereby demonstrating good corporate citizenship as responsible taxpayers.
We want to emphasise that there can never be an optimal disclosure level. The organisational approach to voluntary tax transparency is not an isolated approach but depends on the overall business strategy, broader (stakeholder) reporting and sustainability commitments. In our view, a company’s tax disclosure is determined by who its stakeholders are and for what purpose it is providing the disclosure. What is the company already obliged to disclose? What additional information can help to tell the whole story, which may not be fully explained by legal disclosure obligations?