Innovation in Compliance with Tom Fox Taxman Series: Tax and ESG
In this episode of Taxman, Tom Fox and Tracy Howell conclude the special series by discussing a topic that has yet to be explored by most: tax and ESG.
How Tax and ESG Intersect
Tracy tells Tom, “There are external forces pulling tax into the ‘S’ and ‘G’ of ESG.” In the social sector, different jurisdictions have different tax rates and laws, and as companies begin to operate in a tax-efficient manner, their activities will gravitate towards lower tax regimes. Tracy adds, “You’ve got forces trying to push the concept of ‘fair share’ rather than compliance with tax laws of different jurisdictions.” Governance-wise, it’s becoming more common for companies to be required to talk about their compliance tax audits.
The Role of Tax in a Company
With the growing pressures on ESG transparency, there’s a push to standardize reporting and scorecarding of companies based on their tax transparency. This would include things like the reporting of an organization’s effective tax rate.
Tax and ESG in Multinational Organizations
Institutional investors play a major role in impacting the activities of a multinational company. When making investment decisions, these entities heavily incorporate ESG scorecards with tax transparency, further emphasizing the need for a relationship between the two sectors.
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