ESG Tax Transparency
You might want to check out BRT’s statement signed by 181 CEOs

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In years gone by, business looked primarily to increasing shareholder returns, paying less attention to how their business practices affected the environment and society. For many, the primary concern in supply chain design was cost, with little inquiry into how supply chain partners conducted business. But more and more, such money-oriented approaches to business are no longer viewed as sustainable over the mid- to long term. Rather, for business to succeed over time, companies must balance the interests of all stakeholders. This means an emphasis on environmental, social, and governance (ESG) issues.

In 2019, Business Roundtable (BRT) released a new Statement on the Purpose of a Corporation, signed by 181 CEOs of American firms who committed to lead their companies for the benefit of all stakeholders—customers, employees, suppliers, communities, and shareholders.1 ESG advocates believe that companies that adapt to changing socioeconomic and environmental conditions are better positioned to see strategic opportunities and create competitive advantages over less ESG-focused enterprises.

Tax has emerged as an important element of ESG. The B Team, a coalition of business leaders advocating sustainable business practices, has stated, “Responsible tax can no longer be viewed as solely a technical [matter] for finance or tax departments.”2 According to BRT, taxes are critical to the orderly function of civil society and directly tied to BRT’s commitment to “supporting the communities in which we work.”3

Stakeholders focused on ESG expect companies to conduct their tax affairs in a sustainable manner, measured in terms of good tax governance and paying a “fair share.” ESG stakeholders view the public disclosure of a company’s approach to tax, the amount of taxes paid, and where those taxes are paid as important elements of sustainable tax practice. Such tax transparency is about trust.

Then and Now

Public expectations about corporate tax behavior became a mainstream topic during and after the 2008 financial crisis, with a growing belief that corporations were not paying their “fair share” of tax. The Lux Leaks scandal and the release of the Panama Papers and the Paradise Papers sharpened that perception.

NGOs, policymakers, and other stakeholders have called on multinational enterprises (MNEs) to be more responsible around their tax obligations.4 At the same time, governments launched globally coordinated efforts to better ensure that businesses paid their “fair share” of tax.5 This effort resulted in several global tax reforms, including the requirement that large companies report on the taxes they pay, by jurisdiction, to the tax authorities where they do business—the country-by-country reporting (CbCR) process.6 These efforts have not appeased some ESG stakeholders who want corporations to share the same CbCR information publicly.

ESG standard setters have called for greater public disclosure around tax governance and payments. For example, in 2019, the Global Reporting Initiative issued GRI 207, setting standards for reporting of tax governance, control, and risk management—as well as for public CbCR that includes disclosures of profits, number of employees, and taxes on a per country basis. Further, there are proposals in both Europe and the United States that would mandate public CbCR.7

With a rapidly increasing amount of investment capital seeking “impact investment” opportunities,8 most rating agencies have developed ESG rating indexes. Further, institutional investors and funds are increasingly evaluating ESG behavior in their investment process. Rating agencies and investors view sustainable tax practices as important measures of sustainability.9

Exploring Tax Transparency

The call for public tax transparency arises from some stakeholders’ mistrust toward MNEs due to the perception that MNEs abuse the international tax system to avoid paying their fair share of tax. Some companies, mostly headquartered outside the United States, have responded with greater tax transparency to demonstrate their approach to tax is sustainable and to regain the trust of skeptical stakeholders. Indeed, tax transparency can demonstrate both a responsible approach to tax and how much MNEs contribute to government revenues, and more widely to society at large. The simple fact of being transparent signals the public that a company is acting responsibly.

Tax transparency may take different forms, with disclosures of information that is qualitative, quantitative, or both. Additionally, tax transparency can be seen on a spectrum, with limited qualitative disclosures at one end and detailed qualitative and quantitative disclosures at the other.

Qualitative Disclosures

Qualitative disclosures describe a company’s approach to tax. Many companies today have made their board-approved tax strategy publicly available in a tax strategy document. Since 2016, doing so is a legal requirement for large companies and groups in the United Kingdom.10 Corporate governance recommendations for listed companies in countries such as Spain and Denmark now also include an expectation to publish a board-approved tax strategy. In Australia, many MNEs have voluntarily signed onto the Australian Tax Office’s (ATO’s) Tax Transparency Code,11 which, among other things, requires companies to disclosure their tax strategy.

Public Tax Policy

At the other end of the tax transparency spectrum, we find substantive quantitative disclosures, which mainly take two forms:

  • the total tax footprint: a full accounting of an MNE’s contribution to society comprising the company’s total taxes (including both corporate income and non-income taxes) and taxes collected (such as taxes collected and remitted on behalf of others, such as VAT); these are often reported on a global basis by type of tax, but increasingly we observe MNEs report their total tax footprint by region and, in some cases, by country; and
  • country-by-country reporting: a disclosure of corporate income tax paid on a country-by-country basis, often accompanied by other figures (for example, revenue per country, number of employees per country, and more) to provide context.

In the past few years, an increasing number of MNEs, mostly based in Europe and Australia, have started disclosing data on their total tax footprint. Some MNEs present this information as a single paragraph in their annual financial or sustainability report, whereas others include significant detail in separate tax or economic contribution reports, describing their tax payments across all active jurisdictions and emphasizing their tax commitments and describing how their tax governance arrangements work in practice.

Assessing Your Approach

Determining the right approach to tax transparency can be complicated. No consensus exists about what level of reporting constitutes “good tax transparency.” MNEs starting on their tax transparency journey will need to consider stakeholder expectations, relevant standards, regulators, and the tax transparency disclosures of their peers. There will be requirements to comply with specific legislation and decisions to be made about the degree of voluntary conformity with standards.

Most companies will evaluate the actions of tax transparency leaders (for example, Unilever), reporting standards (for example, GRI 207), relevant rating agencies’ ratings (for example, S&P Global’s Sustainability Index), principle-based standards (for example, Future Fit12), business-led initiatives (for example, the B-Team principles13 and the World Economic Forum’s Stakeholder Capitalism Metrics14), the expectations of NGOs (for example, the Fair Tax Mark15), voluntary schemes (for example, the ATO Tax Transparency Code and the Extractive Industries Transparency Initiative16), and existing regulations (for example, the European Union’s Capital Requirements Directive IV17) and proposed regulations (for example, the EU’s public country-by-country directive18).

Although all of these share some basic principles, details vary, with currently no indication of one standard approach. However, a clear trend exists toward increasingly detailed and recurrent reporting that covers both quantitative and qualitative aspects of MNEs’ approaches to tax. The focus is to present information that is understandable to the general public and informative and valuable to investors.

Government Action

In our view, government action on enhanced tax reporting is likely at some point—maybe sooner rather than later. This will be a significant factor for MNEs as they consider compliance with new disclosure rules and the appropriateness or necessity of providing supplementary tax information.

In June 2021, EU institutions reached political agreement on a public CbCR directive, which will require MNEs with turnover of €750 million for two straight years, whether headquartered in the European Union or not, to disclose their corporate income tax payments on a country-by-country basis for all EU jurisdictions as well as for jurisdictions on the EU list of noncooperative jurisdictions.19 Adoption of this directive had stalled for years until Germany, Austria, and the Netherlands recently voiced support in the aftermath of the COVID-19 pandemic and increasing public pressure.

Meanwhile, in June 2021, the US House of Representatives passed the Disclosure of Tax Havens and Offshoring Act (Title V of H.R. 1187) requiring corporations registered with the Securities and Exchange Commission to publicly disclose CbCR information. Whether this proposal will pass in the US Senate is unknown, but the mere fact of passage in the US House indicates a trend and the current direction of travel.

The United Kingdom’s Finance Act 2016, referenced above and requiring publishing the UK group’s tax strategy, also gives power to the UK Treasury to require, by regulation, public CbCR.20 The UK government has said it will exercise this power once there is international agreement on the issue.

Poland has taken a different approach. Starting in 2021, companies with revenues above €50 million will need to prepare and publish an annual progress report on the implementation of their tax strategy. This report shall include at least:

  • a description of the processes and procedures ensuring performance of taxpayers’ obligations arising from tax regulations;
  • a description of how the taxpayer performs its tax-related duties in the territory of Poland, including the number and type of tax arrangements reported to tax authorities under the EU mandatory disclosure rules;
  • information on controlled transactions, the value of which exceeds five percent of the balance sheet assets;
  • notification on the submitted applications for issuing declaratory and binding rulings; and
  • information about settlements made in countries that encourage abusive tax practices.

Tax and ESG Ratings

Some MNEs are interested in knowing the tax criteria that constitute a portion of their overall ESG ratings from rating agencies. However, this process can be frustrating for companies. Rating agencies take differing approaches to ratings and often look to a different set of tax attributes to develop their ratings, leading to widely varying results for the same company among rating agencies. A recent study has shown a correlation among rating agencies of only 0.46, showing significant disparity.21 Further, most rating agencies disclose only their high-level approach to tax without any detail for specific inquiries and how issues are weighted in developing the “tax score” included in their ESG ratings.

These variations also complicate matters for investors, such as the more than 3,80022 signatories to the United Nations’ Principles for Responsible Investment who wish to assess the responsible tax and ESG credentials of the companies they invest in. These discrepancies have led some investors to develop their own metrics and methodologies to integrate ESG considerations in their investment decisions.

Practical Considerations

Important considerations in determining tax transparency are the cost and the effort to produce reliable data. As all MNEs who have had to prepare government CbCR filings have learned, the extraction and aggregation of tax data, and ensuring the completeness, accuracy, and consistency of the data, have been significant undertakings. This is partially due to the fact that accounting and bookkeeping systems were not designed to collect and report tax data. Additionally, many groups use multiple enterprise resource planning (ERP) systems, complicating any centralized approach to gathering data.

Using CbCR data for public reporting will require additional investment in process and systems. To trust the tax data for public CbCR, companies need to identify risks and weaknesses in their current systems, implement strong data governance measures, and develop guidelines for how to book various tax payments to aid in gathering tax data afterward. More effort must be put in place to ensure public CbCR information is reconciled with group-wide consolidated results and possibly even statutory accounts.

Additionally, some MNEs will consider an assurance process to validate the integrity of their tax data before using it in tax transparency reporting.

As companies assess their approach to tax transparency, it is important to realize that providing numbers in isolation can lead to misinterpretation and misrepresentation. The tax strategy narrative around strategy, policy, risk management, and governance is vitally important in providing a complete picture and comfort that the company’s approach to tax is sustainable.

What You Should Consider Now

The tax function can significantly contribute to your company’s ESG journey. This requires an ongoing assessment of where you are on the tax ESG maturity curve and balancing sometimes competing stakeholder expectations. Key is ensuring that your tax governance is fit for today’s business environment and having a clear policy toward tax transparency. KPMG International has developed a tax ESG methodology and tool set to illustrate what this journey looks like for business—KPMG Tax IMPACT Reporting.

Tax Strategy

Our methodology suggests companies should start with an evaluation of their core tax principles and then develop or refine their tax strategies to project these values. Your strategy statement will drive how your tax principles will be embedded throughout the business.

Maintaining the right tax strategy is an ongoing process driven by factors such as your company’s overall ESG commitments, where you currently are on the tax ESG maturity curve, and benchmarking against peers. Such data can help you make adjustments as needed. However, benchmarking against peers can be difficult, because peer scores are not always available and the reasons for their scores are frequently opaque. Although companies could do their own benchmarking research, service providers often have tools that can assist. For example, KPMG’s Tax ESG Assessment analysis is a proprietary digital solution for benchmarking tax ESG performance using publicly available information.

Tax Governance

Once you’re comfortable that your tax strategy is up to date and fit for purpose, review your tax governance and control framework to ensure it is aligned with your approach to tax as set out in your strategy document. Improvements in the governance and tax control framework may be needed. Most SOX 404 tax controls are focused on accurately reporting the past, whereas tax ESG controls are more expansive, including a focus on how decisions on tax positions are made.

With a solid tax strategy and supporting governance and control framework, companies will be positioned to determine the degree of tax transparency that is right for them, ranging from reporting only what is legally required to full public CbCR. If a company decides to disclose its tax strategy, such a move typically doesn’t raise any real data or compliance complexities. However, a decision to report global taxes paid, by type, is a significant undertaking. Various tax types are often accessible only through different internal systems and can be buried within other cost descriptions. Finding these taxes, unbundling them from other cost centers, and reporting them can be a labor-intensive exercise that requires collaboration with business teams. This is further complicated if the company chooses to disclose these figures on a country-by-country basis. MNEs will need to leverage technology solutions to extract the needed data and automate the reporting process as much as possible. KPMG International’s Tax Footprint Analyzer is an example of such an approach, a technology solution designed to automate data gathering and reporting along with data analytics for insights and improved disclosures.


Much of the ESG community already views as inadequate tax reporting limited to what is legally required under today’s regulatory regimes. Reporting on your global tax strategy is a good place to start. What makes sense beyond that is an informed decision to assess the various considerations described above and to reevaluate them over time. Regardless of where you start on your tax transparency journey, the direction of travel is clear: expect the scope of tax disclosures to expand in the future.

Søren Dalby, Brett Weaver, and Matthew Whipp are tax partners with KPMG in Denmark, the United States, and the United Kingdom, respectively. François Marlier is a senior consultant with KPMG in Denmark. All are members of the global KPMG IMPACT network, which focuses on services and solutions to help companies advance their ESG agendas. This article represents the views of the authors only and does not necessarily represent the views or professional advice of the authors’ KPMG firms.


  1. Business Roundtable, “Statement on the Purpose of a Corporation,” released August 19, 2019, updated
    July 2021,
  2. Torben Möger Pedersen, “Why Responsible Tax Belongs on the ESG Agenda,” The B Team (November 9, 2020),
  3. Business Roundtable, “Statement on the Purpose of a Corporation.”
  4. See, for example, International Monetary Fund, “A Fair and Substantial Contribution by the Financial Sector, Final Report for the G-20,” June 2010,
  5. OECD, “Action Plan on Base Erosion and Profit Shifting,” OECD Publishing, 2013,
  6. OECD, “Transfer Pricing Documentation and Country-by-Country Reporting, Action 13—2015 Final Report,” OECD/G20 Base Erosion and Profit Shifting Project, OECD Publishing, October 5, 2015,
  7. In June 2021, the EU Council and Parliament reached provisional agreement on public CbCR. The rules will go into force upon formal approval by both institutions. Also, in June 2021, the US House of Representatives passed the ESG Disclosure Simplification Act of 2021, which, if passed in the US Senate, would require public CbCR.
  8. Lizzy Gurdus, “ESG Investing to Reach $1 Trillion by 2030, Says Head of iShares Americas as Carbon Transition Funds Launch,” CNBC, May 9, 2021,
  9. Gwladys Fouche, “For First Time, Norway’s Wealth Fund Ditches Firms Over Tax Transparency,” Reuters, February 1, 2021,
  10. See the UK Finance Act 2016, c. 24, at
  11. The Australian Taxation Office’s Voluntary Tax Transparency Code is endorsed by the Australian government as part of its 2016–2017 federal budget. See for information.
  12. Future-Fit Foundation. Future-Fit Business Benchmark Action Guide BE21: The Right Tax Is Paid in the Right Place at the Right Time, Release 2.1, April 2019,
  13. The B Team, “A New Bar for Responsible Tax: The B Team Responsible Tax Principles,” 2018,
  14. World Economic Forum, “Measuring Stakeholder Capitalism: Towards Common Metrics and Consistent Reporting of Sustainable Value Creation, September 22, 2020,
  15. The Fair Tax Foundation operates a certification scheme in the United Kingdom called the Fair Tax Mark, launched in February 2014, that “seeks to encourage and recognise organisations that pay the right amount of corporation tax at the right time and in the right place.” See for information.
  16. The EITI is the global standard for the good governance of oil, gas, and mineral resources. See for information.
  17. European Union Directive 2013/36/EU.
  18. European Council, “Public Country-by-Country Reporting by Big Multinationals: EU Co-Legislators Reach Political Agreement” [press release], Council of the European Union, June 1, 2021,
  19. European Council, “Taxation: EU List of Non-Cooperative Jurisdictions,” Official Journal of the European Union, February 26, 2021,
  20. UK Finance Act 2016, Schedule 19, paragraph 17.
  21. Rajna Gibson Brandon, Philipp Krueger, Nadine Riand, and Peter S. Schmidt, “ESG Rating Disagreement and Stock Returns,” PRI [blog], United Nations Principles for Responsible Investment, March 27, 2020,
  22. United Nations Principles for Responsible Investment, “Regional Support,” United Nations, accessed August 20, 2021,

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