Companies are becoming more transparent about their taxes

For the ninth consecutive year, PwC has supported the Dutch Association of Investors for Sustainable Development (VBDO) in conducting the Tax Transparency Benchmark. The current edition shows that companies have been significantly more transparent about their taxes. Compared to last year, this is noteworthy because this year's benchmark has reviewed less Dutch companies and more European companies. 

Although an exact comparison between the years cannot be drawn as the scope is not the same as last year, the 2023 edition of the Tax Transparency Benchmark suggests that companies are increasingly becoming aware that their approach to tax is a powerful indicator of their societal impact, and that tax transparency can be seen as an opportunity to build trust with their stakeholders.

The Tax Transparency Benchmark is a comparative study on tax transparency practices of Dutch and European listed companies. This year’s benchmark reviews the tax transparency practices of 51 Dutch companies and 65 listed companies from Belgium, Denmark, France, Germany, Italy, Spain, and Sweden, active in the financial, energy, pharmaceutical, technology and consumer goods sector.  

The benchmark examines and scores companies based on a predefined set of criteria, taking into account a company’s tax strategy, alignment of tax with the business, tax risks, controls and assurance. Ultimately, the winner of the benchmark is corroborated by an expert jury. Last year, the methodology was revised to better reflect society and stakeholder expectations and include new tax laws, regulations and definitions. Most importantly, the criteria now require companies to report on sustainability (ESG) and tax.

Philips is the deserved winner of the Tax Transparency Benchmark 2023. The jury especially praises the depth and quality of Philips’ tax reporting. The jury takes note of the comprehensive country-by-country report, which is explicitly linked to the GRI 207 Tax Standard and includes information on environmental and social factors. Furthermore, the jury commends Philips for its clear description of the role taxation plays within their value creation model. 

In second place, with a score of 39 points, is NN Group. The jury is of the opinion that NN Group clearly illustrates that it is in control of tax. Having led the benchmark for a total of four consecutive years, NN Group now has the challenge to return to the top. The jury also praises Repsol, last year’s winner, as Repsol again shows great transparency in its tax reporting and scores 38 of the 40 points. With this score the company ranks first among the European companies in the benchmark.

With the changing expectations of various stakeholders and the introduction of new regulations such as the CSRD and public CbCR, it is important to keep abreast of all relevant tax transparency developments. When working on tax transparency reporting, you can consider taking the following steps:

• Formulate or review your approach to tax and make it publicly available.
• Provide insight into how your company approaches tax and tax reporting by providing concrete examples of the implementation of the tax strategy.  
• Consider alignment of your tax reporting with voluntary tax standards.
• Elaborate on how your approach to tax supports your sustainability strategy. 
• Be aware of the link to tax under the CSRD and determine if tax is a material topic.
• Align your tax transparency reporting with your transfer pricing filing. 
• Analyse the data requirements under Public CbCR, Pillar 2 CbCR safe harbor and GRI 207-4 CbCR.
• Elaborate on the tax risks, tax risk management and the tax control framework. 
• Engage with internal and external stakeholders to improve your approach to tax and report on it.

These steps will offer your company the opportunity to build trust with your stakeholders and demonstrate your commitment to society by being transparent about your tax position.