Getting Tough On Corporate Tax Transparency

Corporate tax strategies have gotten so creative that one NGO with a corporate audience is blowing the whistle.

The Global Reporting Initiative shook up its audience of multinational corporations last month with the release of GRI 207: Tax 2019, a new framework for reporting business activities, tax disclosure, strategy and governance. The release marks a major departure for the international NGO, which for 23 years has provided guidance to companies on how to report their environmental and social impacts. For the first time, the GRI felt it necessary to step onto the turf of global regulators, standard setters and local tax authorities.  

The GRI was responding to a chronic lack of “reliable and comparable, country-by-country information on the taxes that multinational corporations contribute,” says Alex Cobham, CEO of the Tax Justice Network. He argues that the existing standard practices, compliance requirements and legal processes are not doing the job. “Every year, the global economy we all live and work in loses an estimated $500 billion to multinational corporations not paying the tax they owe,” Cobham said in public comments on GRI 207. “That’s $500 billion less each year to fund public services and to invest in our communities.”  

The GRI says it developed the new, voluntary framework to provide clarity on how much companies contribute to the tax base of the countries in which they operate, thereby curbing tax avoidance and helping governments fund services and sustainable-development initiatives. The new standards suggest more disclosure in several areas, including some practices, like transfer pricing, that companies prefer to keep out of the public domain.

Supporters of GRI 207, such as Gary Kalman, executive director of the Financial Accountability and Corporate Transparency Coalition, are urging companies to adopt GRI 207 as soon as possible. “GRI’s tax standard is the clearest and most significant recognition to date of the global trend toward tax transparency for multinational companies,” he said in responding to the proposal. “The standard is both necessary and balanced.”

Others are not convinced that a straight line can be drawn between GRI 207 and greater funding for sustainable-development initiatives, however. “While we see benefits from improving transparency around tax,” PwC commented, “we question whether more detailed public tax reporting would necessarily lead to increased tax revenues.”