Taxation

Why is it important?

Tax is not just a cost to be minimised, it is a key systemic risk that can have a serious effect on the profitability and the sustainability of a company, as well as broader impacts on overall portfolio and macroeconomic returns. 

Aggressive tax planning has the potential to create earnings risks and lead to governance problems, damage a company’s reputation, and cause macroeconomic and societal distortions. Adopting aggressive tax planning strategies has become a key focus area for governments, international regulators and civil society.

Our view

Companies and their boards should be equipped to address potential changes in their business environments. Tax-related risks extend beyond short-term earnings risks. The board should be aware of the risk of changes in tax rules, including to any incentives or structures operating to the benefit of the company. Boards should understand how the company’s tax strategy operates in practice, and be ready to challenge unduly complex strategies, in particular, where it is clear that such strategies have been employed solely to reduce the tax bill. When evaluating long-term risks, the board should seek to understand any potential impact on key stakeholders.

Our members expect that companies will disclose their tax policy and strategy, tax-related risks, material tax incentives, governance and risk management processes and their tax-related performance (such as country by country activities and any current tax-related disputes). We encourage companies to adopt the Board of Taxation’s Voluntary Tax Transparency Code.

Links

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