Tax transparency on the rise, but disclosures often incomplete: GRI
Global adoption of tax transparency measures is rising among large public companies, but comprehensive disclosure is patchy, recent research has shown.
The Global Reporting Initiative (GRI) 207 framework is a global tax transparency standard seeking to promote trust and credibility in companies’ tax practices.
A survey by GRI found that only 21 per cent of Asia-Pacific companies that refer to GRI 207 disclosures in their financial reports completed comprehensive disclosures aligned with international standards.
This compared to 62 per cent of companies in Europe, 53 per cent in Africa, and 28 per cent in the Americas implementing comprehensive disclosures.
The GRI 207 includes four key disclosure areas relating to a company’s approach to tax, their tax governance, stakeholder engagement and country-by-country tax reporting.
Companies were most likely to disclose their approach to tax, while organisations’ adoption of country-by-country reporting lagged.
Of 71 companies that mentioned all four GRI 207 categories in their financial reports, 73 per cent disclosed their approach to tax, 56 per cent disclosed their tax governance, 54 per cent disclosed stakeholder engagement, and only 22 per cent included country-by-country reporting.
“We acknowledge that reporting is a journey and applaud these leading companies that have taken the decision to make their tax practices more transparent,” Bastian Buck, GRI chief standards officer, said.
“The next step is more comprehensive and detailed reporting, which fully reflects how businesses contribute in the countries and communities where they operate.”
Based on the study’s findings, GRI recommended companies include more detailed information for each GRI 207 requirement, especially in country-by-country reporting.
It also suggested companies take steps to ensure stakeholders can easily access their GRI 207 reporting data in the interests of transparency.
Australia’s incoming country-by-country reporting requirements are an example of tax policy aligned with the GRI 207 framework, which will increase compliance with GRI 207-4 (country-by-country reporting) standards among companies that have operations in Australia.
Accounting firm Grant Thornton said multinationals operating in Australia were unprepared to adapt to incoming country-by-country reporting obligations, mandatory for reporting periods from 1 July 2024.
“Multinationals have had to contend with a raft of new legislation including thin capitalisation, global minimum tax rate and public Country-by-Country reporting,” Jason Casas, partner at Grant Thornton Australia, said.
“Many companies have become resource-constrained and are only now able to dedicate resources to understand the full extent and impact of these requirements.
“There will be a need to coordinate with overseas group entities (typically headquarters) and this will require additional time to complete the local file. With fines of up to $825,000 for late lodgements, being prepared is key to meeting the new requirements.”
Amid the global shift towards greater tax transparency, GRI’s Bastian Buck suggested companies get ahead by aligning their disclosures with the GRI 207 framework.
“Companies that align with the disclosures in GRI 207 will be best placed not only to respond to the needs of their stakeholders, investors included, but also to get ahead of legislative changes that are increasing requirements for tax transparency,” Buck said.
