Getting to Good: Towards responsible corporate tax behaviour

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Tax is an issue of good corporate governance and responsible business practice. This discussion paper, written jointly with ActionAid and Christian Aid, proposes what ‘good’ looks like in responsible corporate tax behaviour, and contains a wide range of positive behaviours and actions companies can undertake to go beyond legal compliance and result in significant gains for developing countries.  Companies, too, will benefit because responsible tax behaviour helps mitigate risk and is in companies’ own long-term interest. The best companies – and their investors – recognise that their success is inseparable from the success of the society in which they operate. This paper will be of great interest to companies and investors seeking to place tax management squarely at the heart of responsible and truly sustainable business.
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  November 2015   Discussion paper: GETTING TO GOOD –  Towards Responsible Corporate Tax Behaviour  A discussion paper examining why and how approaching tax responsibility beyond legal compliance benefits companies and the developing countries in which they operate  Forewords .......................................................................................................................................3About this paper .............................................................................................................................8PART 1: The case for responsible corporate tax behaviour ........................................................9  A. The significance of corporate taxation for sustainable development .....................................................9 B. A role for companies to play ............................................................................................................................9 C. Why companies should care about ‘Getting to Good’ ............................................................................11 D. How to approach tax responsibility ............................................................................................................12 PART 2: Eight propositions for responsible tax behaviour and examples ..............................14  1. Tax planning practices .....................................................................................................................................15 2. Public transparency and reporting ...............................................................................................................19 3. Non-public disclosure .....................................................................................................................................22 4. Relationships with tax authorities ................................................................................................................24 5. Tax-function management and governance ................................................................................................26 6. Impact evaluation of tax policy and practice .............................................................................................28 7. Tax lobbying/advocacy .....................................................................................................................................30 8. Tax incentives ....................................................................................................................................................32Q&A: What we’re asking of companies and what we’re not ................................................................................34Conclusion: What next? ................................................................................................................................................36Annex A: How our approach corresponds to elements .....................................................................................37of the corporate responsibility to respect human rightsAcknowledgements .......................................................................................................................................................38 Table of contents  Getting to Good    –   Towards Responsible Corporate Tax Behaviour    3 As organisations working to end poverty and build fairer and more equitable societies that are financially, socially and environmentally sustainable, we understand the importance of business, and its ability to shape and transform lives around  the world. Much of our work is focused on developing countries, where millions of women and men live in poverty and are denied their rights. The pressing problems of ending poverty and tackling economic inequality require businesses  to be part of the solution. In our work we also see how vital it is for developing country governments to collect revenues from taxation, and in particular corporate tax revenue. This funds essential public services to fulfil people’s rights such as healthcare and education, and the public infrastructure needed to raise living standards, increase equality and build well-functioning economies. This is why advocating for government-led reforms and binding rules underpins our tax justice work and  the work of the wider tax justice community of which we are a part. But tax is also an issue of good corporate governance and responsible business practice. There are immediate and meaningful steps companies can take to improve the impact of their tax behaviour on the developing countries in which  they do business. The paper contains a wide range of positive behaviours and actions companies can undertake on their journey towards responsible corporate tax behaviour – some are immediately implementable (and perhaps already being implemented), while others may evolve over a longer time. The spectrum of propositions and examples (though not exhaustive) reflects a conscious decision on our part not to limit the ambition of  the paper – allowing multiple entry points for businesses, and more importantly, resulting in significant gains for developing countries. Troels Boerrild (ActionAid), Dr Matti Kohonen (Christian Aid), and Radhika Sarin (Oxfam) Forewords Companies, too, will benefit because responsible tax behaviour helps mitigate risk and is in companies’ own long- term interest. The best companies – and their investors – recognise that their success is inseparable from the success of  the society in which they operate. Paying tax is an investment by companies because it supports the development of the  type of societies in which profitable, sustainable companies can thrive. These are peaceful, stable societies that have sustainable transport networks and power systems, educated, gender-balanced, healthy and productive workforces, prosperous economies and strong consumer bases with purchasing power. By promoting effective governance, responsible tax behaviour also helps tackle corruption, which is harmful to  the business-enabling environment. Those who understand  this will appreciate our call for tax responsibility beyond legal compliance, by which we mean conduct that reflects a company’s broader duties to contribute to public goods on which companies depend.  We acknowledge that the need to inform the public on  this issue has sometimes resulted in debate that has been polarised, often adopting a ‘pass or fail’ approach to evaluating corporate tax practices. With this paper we seek to progress  the discussion and to establish a genuine, constructive dialogue between our organisations and business, in order to move towards a better understanding of what ‘good’ looks like in responsible corporate tax behaviour. We hope this paper provides a practical approach (as opposed to a one-size-fits-all standard) for companies working to improve their  tax behaviour, and that it also serves as a useful resource for investors seeking to ask the right questions of companies to guide their investment decisions. It’s time to place tax management squarely at the heart of responsible and truly sustainable business. Troels Boerrild, Senior Policy and Advocacy Adviser (Private Sector and Tax), ActionAidDr Matti Kohonen, Principal Adviser (Private Sector), Christian AidRadhika Sarin, Policy Adviser (Private Sector), Oxfam  4 Getting to Good    –   Towards Responsible Corporate Tax Behaviour  There continues to be much interest in the responsible tax behaviour of individuals and business. This is a challenging subject, not only because it is inherently subjective and therefore there is a range of opinions on the  topic, but also because  the debate is evolving as attitudes and tax policies change. For tax-compliant businesses, less objective rules – which are often open to different interpretations by authorities – also present the problems of double taxation and large amounts of time spent on tax audits.It is clear that corporate tax revenues are disproportionately important for the sustainable development of lower income countries, where tax compliance in the rest of the economy is generally lower. As a result, it is critical to identify ways to close tax collection gaps, and invest in promoting a culture of compliance across all taxpayers, individuals and business alike.International tax reform, through the OECD’s Base Erosion and Profit Shifting (BEPS) project, aims to better align taxation with value creation. Again, improving the  tax revenues of lower income countries through this reform, whether as a consequence of deliberate business investment or organisational decisions (as discussed in  this paper), or through investments in capacity building for  tax administrations, better-designed policies to support investment, or more likely a combination of all these things and more, needs thoughtful consideration. So too does the  tax governance, and relationships with the authorities, in these countries. Not all will agree with the ideas presented here, nor the extent of reporting and disclosures suggested, but this is not  the point. What is important is shaping better tax policy in a constructive, solutions-orientated way, and this paper makes an important contribution to this ambition.  Janine Juggins is Senior Vice President Global Tax, Unilever   Janine Juggins, Unilever 
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