On 5 December 2019, GRI (Global Reporting Initiative) announced the world’s first public reporting standard for corporate tax, which includes country-by-country disclosures. The article below investigates the increasing need for tax transparency and how this need let to the launch of the GRI Tax Standard.
Sustainable development, both nationally and internationally, is essentially based on governments being able to fund infrastructure and services through tax income – including corporate taxes. The latter enable companies worldwide to contribute to the local economies where they produce, store or sell their products and services.
On 3 April 2016, the Süddeutsche Zeitung newspaper revealed the use of offshore financial services and shell companies by certain companies and individuals in order to minimise their tax liabilities. This multi-country investigation became widely known as the Panama Papers and exposed the scale of global business’s tax avoidance, often completely legal.
Multinational companies ought, however, to be transparent to their stakeholders about how much tax they pay, where they pay their taxes, and how the country-by-country taxes they pay relate to the locations where they do business.
Although businesses do normally release some tax information, accessible, reliable data on how much tax they pay and where, can be hard or impossible to find. Corporate tax avoidance, globally, has been estimated at US$500 το US$600 billion each year in lost revenue.
As a consequence of this lack of transparency and widespread tax evasion, investors, governments, civil society, the media and the public around the globe are increasingly calling for tax transparency, including, most importantly, complete and comparable disclosures on a country-by-country basis.
Taking this massive demand for accurate, reliable tax information into account, the Global Sustainability Standards Board (GSSB), the independent entity that oversees the development of the GRI Standards, collaborated, in 2017, with international experts to create the first ever global reporting standard on tax. Subsequently, after a period of global consultation, to gather views from all interested parties, GRI launched the new Tax Standard (known as GRI 207: Tax 2019). Tweet This! Published on 5 December, the Tax Standard is freely available for any organisation to use to disclose their taxes in a transparent way.
The new GRI Tax Standard is intended to promote, through its adoption and use, an open discussion between reporting organisations, government, the public and civil society about tax policies and practices, and on how tax revenues can promote sustainable development.
Major investors, industry bodies, civil society activists, charities, trade unions and many other groups worldwide welcomed the new Tax Standard and the greater transparency and openness it seeks to achieve. They include asset managers Royal London and Hermes, Accountancy Europe, Oxfam, the UN-supported Principles for Responsible Investment, global union federation Public Services International, and civil society groups the Tax Justice Network and FACT Coalition.
To start rebuilding public trust in companies, strengthen corporate accountability and facilitate the informed dialogue stakeholders globally demand, increased openness on tax is key.
80% of the world’s 250 largest companies report in accordance with the GRI Standards
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