Sustainability as a tax focus

PwC has previously written about sustainability being 2017’s tax issue. Recently, the think tank, SNS, Studieförbundet Näringsliv och Samhälle, held a seminar on the theme, ”Tax – a sustainability issue?”

Authorities, investors and society are demanding increased transparency from companies regarding how and where they pay tax. New guidelines are being issued by the OECD and EU. In Sweden, the Government has given the Tax Agency the assignment to encourage companies to develop tax policies. This question has come into focus since the media’s attention to Lux Leaks and the Panama Papers.

Tina Zetterlund, Head of Tax Services at KPMG, is of the opinion that tax is now experienced as comprising a risk factor. Previously, tax was seen to be a cost which should be minimized and which also often resulted in a bonus to those who were responsible for working to control tax expenses. The number of large companies who include “the tax footprint” in a variety of contexts in their reports is growing. Developments are moving very quickly – tax has become a sustainability issue, concludes Zetterlund.

Ingemar Hansson, Director General of the Swedish Tax Agency, believes that tax impacts the brand and is a natural part of a risk analysis

A tax policy should, according to Hansson’s view, include the following:

• Prohibition against tax avoidance.
• Refraining from tax arrangements where one does not know if that type of arrangement is actually allowed. The same applies to aggressive tax planning.
• The choice to refrain from dealing with parties who do not handle their taxes in a proper manner.

Roger Persson Österman, Professor at Stockholm University, maintains that CSR, Corporate Social Responsibility, and sustainability are one and same thing. During the seminar, Roger presented the question–“Should we have legal or ”social” taxation? “ The answer is legal. Swedish society is based on law and Österman brought attention to some of the ”grey zone problems” which are a result of the Tax Agency’s approach.

The larger companies were represented by Yvonne Bertlin, Tax Director, Group Finance, CFO for AstraZeneca. “ Look at sustainability reporting regarding tax as a possibility”, was her view, and she talked about AstraZeneca paying SEK 35 billion in corporate tax during the last 10 years, and SEK 65 billion in preliminary tax and social security contributions during the same period. The figures spoke for themselves and were even more poignant when translated into the equivalent number of nursery school places and doctors’ visits, and she also added that the company does not work with “artificial” tax planning?

Bertlin also made a recommendation to the Government in this context. In the UK, a reduction in corporate tax to approximately 15 percent is being discussed. “Taxes should be low but must be paid,” is the new motto. In other words, the UK is offering something in return, noted Bertlin. It is important that Sweden also takes these developments to heart and doesn’t just focus on sustainability, she concluded.

Comments

The seminar shows clearly how the winds of politics are blowing just now.

A possible danger with the Tax Agency’s view is that it can make things more difficult for the companies. In addition to the companies needing to be aware of and understanding tax regulations, they now also have to identify any “zone of uncertainty” in terms of what should not be included. Those who are uncertain are encouraged to present dialogue queries to the Tax Agency. Not only is it unfortunate that this needs to be done, but these queries are, today, public information. The ambition and focus of the Government and Tax Agency should, instead, be to design clearer rules.

But even in spite of this situation – the political winds are just now blowing in this direction!

Through PwC’s methodology – Total Tax Contribution – we can assist both small and large companies to report the type of overall tax contribution figures reported by AstraZeneca. By identifying and measuring a company’s total tax contribution to public finances, one can communicate, in a clear and simple manner, the operation’s total contribution to society.

Likewise, PwC can help in designing tax policies for both larger and smaller companies. These policies can incorporate a general approach and overall premises and can, then, be adapted to meet the specific circumstances and requirements of the company in question.