Carla Perry | Specialist | Tax Reporting & Governance | PwC South Africa | mail me |
Until now, reporting non-financial information on tax has largely been voluntary, but many guidelines do exist and companies that are taking the lead are doing so by providing disclosure and explanatory narratives far beyond the statutory requirements.
We have seen that organisations can derive great value from being transparent on their tax matters, especially considering the piqued interest of stakeholders in recent years.
In our newly released seventh edition of the Building Public Trust through Tax Reporting publication, we assess South Africa’s evolving tax reporting landscape, outline four key imperatives to ensure your organisation has a sustainable tax driven future, outline how to translate voluntary tax into a business reality, and explore how Environmental, Social, and Governance (ESG) reporting presents a new opportunity to reframe tax reporting as a positive for business.
Building trust
An organisation’s tax reporting journey begins with trust. In order to build trust today, organisations must meet the expectations of a broader set of stakeholders on a wider range of issues such as cybersecurity, diversity, data security, tax payments, and environmental performance.
The result is that they need to build trust at a time when it is both more fragile and more complicated to earn.
Tax is a powerful indicator of how a business views its role in society and commitment to its purpose. Tax disclosures are often read by people who are not steeped in the complexities of tax and compliance, so taking the time to develop and communicate a tax narrative can prevent misunderstandings.
In our publication, we outline four key imperatives to ensure your organisation has a sustainable tax driven future.
Find out what matters to your stakeholders
Solely focussing on financial results is no longer enough. Create a narrative on tax that works for all stakeholders – one that is comprehensive, relevant, balanced and accurate.
Get the right data
Be clear about what data is required. Collecting the data required will involve planning, specialised expertise to measure and assess it, a way to assure it is reliable, strict oversight and a strategy to deal with the results.
Collaborate and consult
Almost every business decision has a tax impact, and those impacts will take on increased visibility in the extensive tax disclosures that are likely to feature more prominently. That is why it is imperative for tax departments to engage across the entire business to align its tax strategy with broader corporate strategy.
Tell the right – and full – story
Tax transparency sends a powerful message about a company’s commitment to society. A carefully considered tax transparency strategy, including a compelling narrative, is an opportunity rather than a risk or inconvenience for companies.
Translating voluntary tax reporting into business reality
How organisations consider their tax disclosure differs.
“There is no one-size-fits-all approach to tax transparency and, depending on geography, sector, and other factors, different businesses will come to different conclusions at different times about how much and what information should be disclosed to build trust.”
– Kerneesha Naidoo, Tax Reporting and Governance Manager at PwC South Africa
We have developed a Tax Transparency Framework that is intended to guide companies in developing a tax transparency strategy that is fit for purpose and enable them to make an informed decision on transparency ‘for whom and for what purpose’.
Notwithstanding these guidelines and transparency drivers, it is evident from this study that most large listed South African companies still do not publicly report more information on tax other than what is required from accounting standards.
ESG reporting
Looking at tax reporting through an ESG lens has the potential to tell a more holistic and relevant story about a business’s purpose, thereby building trust.
An ESG reporting lens can enhance transparency and affect how tax disclosures are viewed in three ways:
- First, it increases the scope of reporting to non-financial, material factors such as carbon emissions and workplace racial and gender diversity, which themselves have tax implications.
- Second, it emphasises the link between governance and transparency, which is the foundation of trust.
- And third, an ESG-based approach to tax reporting is about more than publishing data; it’s about having a tax strategy, and a narrative surrounding that strategy, that are aligned with the company’s overall values.
In this publication we also delve into the world of green taxes and get the views of our ‘green’ experts in order to uncover where the ‘E’ in ESG fits into building public trust.
In conclusion
It’s important to remember that to remain credible and trustworthy, companies need to shift the tax conversation to tangible and concrete statements about the impact their business is having on society.
If you are claiming that you are making an impact, then you need to be able to prove that. And that’s what makes a statement of your position on tax powerful.
We expect the tax reporting landscape to undoubtedly continue to evolve, creating operational challenges for the tax function. However, by breaking down big challenges into smaller ones, companies can find and create opportunities internally and externally, and by doing so, contribute to the public debate on tax as an enabler of societal good.
