Carla Perry | Associate Director | Tax Reporting & Governance | PwC South Africa | mail me |
More South African companies need to focus on building public trust by enhancing tax transparency reporting to unlock greater value. Today, businesses face unprecedented scrutiny from the public and stakeholders, creating pressure on leaders to remain accountable and foster trust.
One way to achieve public trust through tax reporting is by prioritising tax transparency, which can help address any existing trust deficit.
In our South Africa’s ninth edition of the Building Public Trust Through Tax Reporting – 2024 publication, tax transparency among the top 100 Johannesburg Stock Exchange (JSE)-listed companies is reviewed. The publication examines common challenges faced by tax executives in reporting and offers a unique perspective on tax transparency in Africa.
Tax has become an important aspect of broader sustainability and Corporate Social Responsibility (CSR) discussions. However, sustainability reporting remains in flux, making tax an increasingly material consideration for companies.
To maximise fiscal reporting benefits, organisations need robust tax governance frameworks and technology. This enables companies to understand their tax environments comprehensively. It also allows them to monitor their total tax contributions, including taxes borne and collected across their value chains.
The crucial role of tax transparency for building public trust
Tax transparency extends beyond complying with tax laws and regulations. It is vital for building trust, managing risks, and ensuring good governance.
By voluntarily sharing public information, companies can explain their tax practices, policies, and overall contribution to the economy. We assessed the top 100 JSE-listed companies using our Tax Transparency Framework.
The framework offers a benchmark with clear and comparable measuring criteria, focusing on four key areas:
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Context
Evaluates whether an organisation effectively communicates tax information and integrates it with other company disclosures.
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Tax strategy and risk management
Assesses whether companies disclose their tax strategies, risk management, governance, and tax’s role in environmental, social, and governance (ESG) considerations.
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Tax numbers and performance
Reviews key financial indicators, rate reconciliation, tax incentives, and performance beyond IAS12 requirements.
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Total tax contribution and wider impact
Examines disclosures about jurisdictions, economic contributions, and the broader impact of tax on corporate citizenship.
Tax transparency performance among 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.
| 2023 | 2022 | 2021 | |
| Overall | 29% | 29% | 23% |
| A – Context | 33% | 34% | 32% |
| B – Tax strategy and risk management | 32% | 31% | 25% |
| C – Tax numbers and performance | 34% | 34% | 30% |
| D – Total tax contribution and wider impact | 19% | 21% | 15% |
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.
| Industry | Number of companies | Minimum company score | Average company score | Maximum company score | Average overall score |
| Financial | 22 | 0% | 31% | 95% | 29% |
| Basic materials | 20 | 0% | 46% | 90% | 29% |
| Real estate | 14 | 3% | 12% | 23% | 29% |
| Consumer staples | 11 | 8% | 21% | 45% | 29% |
| Consumer discretionary | 10 | 8% | 15% | 31% | 29% |
| Industrial | 7 | 0% | 20% | 40% | 29% |
| Technology | 5 | 10% | 34% | 60% | 29% |
| Healthcare | 4 | 8% | 21% | 51% | 29% |
| Telecommunications | 4 | 8% | 50% | 83% | 29% |
| Energy | 3 | 0% | 40% | 79% | 29% |
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)
Tax transparency in South Africa
While tax transparency disclosure is not mandatory in South Africa, the JSE has released sustainability disclosure guidance that includes tax reporting. This guidance aligns closely with the requirements and recommendations of GRI 207: Tax 2019 (GRI 207).
Many organisations consider their tax disclosures based on the audience and purpose, rather than following a tick-the-box approach. It is important to note there is no one-size-fits-all approach to tax disclosure. Depending on geography, sector, and other factors, businesses reach different conclusions at different times about how much information to disclose. This variation in disclosure strategies aims to build trust with stakeholders.
– Kerneesha Naidoo, PwC South Africa Tax Reporting & Strategy Manager
To provide more value to clients and stakeholders, tax executives need a multilayered understanding of their organisation. Identifying and managing tax risks requires an understanding of the company’s business model, including revenue streams, cost structures, and market dynamics.
Executives must stay informed to make strategic decisions and untangle the intricate ways internal functions interact across borders. As global tax regulations and non-financial reporting requirements evolve, it is critical to anticipate and adapt to what lies ahead.