How Tax Transparency and Sustainability go hand in hand

In an era of increasing transparency and sustainability requirements, tax transparency is more important than ever. This article shares the key insights from PwC's "Global Tax Transparency Study". As part of this study, PwC assessed the tax transparency of 800 listed companies in over 21 countries, including 125 of the largest listed Swedish companies under the Global Tax Transparency Framework (GTT Framework).

The GTT Framework, developed by PwC, is a comprehensive tool designed to assess the maturity of voluntary tax reporting among companies worldwide.  It consists of 37 questions that focus on four main areas: Approach to Tax, Tax Governance and Risk Management, Tax Numbers and Performance, and Total Tax Contribution and the Wider Impact of Tax. The framework aligns with several global standards, including the Global Reporting Initiative (GRI) 207, the Corporate Sustainability Reporting Directive (CSRD), and the OECD Guidelines for Multinational Enterprises, ensuring that the assessments are robust and in line with global best practices. 

125 publicly listed Swedish companies were assessed

This year, PwC Sweden participated in the GTT Framework for the first time, assessing 125 listed Swedish companies on Nasdaq Nordics Large Cap. The assessment involved a detailed review of publicly available documents such as annual reports, sustainability reports, and tax policies/strategies.  Each company's disclosures were evaluated using the GTT Framework tool, both manually and with the assistance of AI (Harvey). The goal was to gauge how well these companies report their tax information and to identify areas for improvement.

Best performance in the "Tax Numbers and Performance" category

The review revealed a diverse landscape in tax transparency and sustainability reporting among Swedish companies. Some companies demonstrated strong tax governance and performance, while others showed significant room for improvement. On average, Swedish companies performed best in the "Tax Numbers and Performance" category, with an average score of 40.8% out of a possible 100%. This suggests that many companies are relatively good at disclosing their tax numbers and explaining variances between cash tax paid and tax charges in the income statement. However, the "Total Tax Contribution and Wider Impact" category saw the lowest average score of 10.8% (out of 100%), indicating significant opportunities for improvement in contextualizing tax contributions within the broader framework of responsible corporate citizenship. The "Approach to Tax" category had an average score of 23.6% (out of 100%), showing a need for more consistent practices, while the "Risk Management" category had an average score of 14.4% (out of 100%), underscoring the necessity for more detailed risk management processes.

Tax integrated with ESG reporting is still in its nascent stages

An emerging trend among Swedish companies is the integration of tax within Environmental, Social, and Governance (ESG) reporting.  Notable examples include companies that have embedded tax within their ESG narratives, explicitly linking tax payments to social and economic value creation.  However, the average score for integrating tax within ESG reporting was 0.3 out of 2, indicating that this practice is still in its nascent stages. 

About the report

The Global Tax Transparency Study report was launched on November 14, 2024, offering valuable insights into tax transparency practices across various regions and industries. The report can be found here. A global event was also held on the same date, providing an excellent opportunity to engage in discussions about tax transparency and sustainability. To watch the recording of the event, please visit the following link. If you have any questions regarding the GTT framework, its assessment process and the list and ratings of Swedish entities, or if you would like to discuss tax policy and strategy in more detail, please do not hesitate to contact your regular PwC Tax advisor or reach out to Hanna Myronicheva and Femke Van der Zeijden.