Technology is also accelerating data sharing and analysis, leading to greater transparency.
For decades, senior executives were reluctant to publicly discuss a company’s tax position. But initiatives such as the Organisation for Economic Co-operation and Development’s Base Erosion and Profit Shifting (BEPS) project are likely to make more information accessible to tax authorities, as well as politicians and activists who could build cases that companies should be paying more taxes.
“The practice has tended to be to share nothing beyond what is required by statute and to speak of tax if and only if there was no other choice, and then only in defense of the company’s reputation and cash flow,” says Gary Paice, EY Tax Performance Advisory, Global and Americas Leader.
“In the future, companies will share more information proactively as a means of educating the public as to the full extent of taxes paid and to get in front of any potential controversy.”
A company often hears the same questions over and over again, such as queries about variances in the taxes being paid, according to Fortum’s Salo. But amid so many complexities, short, simple answers to inquisitive groups usually lead to still more questions.
For these and related reasons, Fortum decided to become more proactive and transparent in explaining its tax payments and practices, by publishing its annual tax footprint report.
Along with the company’s total tax revenue and a breakdown by tax, the report also presents an overview of the inner workings of the group’s tax department. For example, it highlights the ways the department helps its organization to achieve compliance while at the same time aiding business units in planning their operations more effectively.
“By being open, we are informing people about just how much we are contributing to the communities we serve,” Salo says. “It improves relationships and understanding.”
A version of this article was originally published under the title Tax teams enter era of broader transparency on Tax Insights