Should your company disclose more tax information?

An independent standards organisation calls for multinational enterprises to be more transparent about their country-by-country profits and taxes.

Should your company make more of its tax information available to the public? Independent standards organisation Global Reporting Initiative (GRI) has issued a new reporting standard that businesses can use to voluntarily provide more detailed public disclosures about their tax strategy and their country-by-country business activities and payments.

Amsterdam-based not-for-profit GRI is known for its suite of voluntary reporting standards that numerous large companies adhere to in their sustainability reports. The new standard, known as GRI 207, issued in December 2019, seeks to build upon country-by-country disclosures that large multinationals already make in connection with the Organisation for Economic Co-operation and Development’s base erosion and profit shifting framework. While those disclosures are made only to tax authorities, however, GRI 207 means putting such tax information in the public domain.

The new standard takes effect 1 January 2021, but GRI encourages companies to adopt it sooner.

An emerging ESG criterion

Why would a company agree to publicly release more of its tax information? One consideration, at least, is that many financial services firms have begun offering investment products that use environmental, social, and governance (ESG) criteria. Due to recent media and government attention to issues of profit shifting and tax avoidance, corporate tax responsibility is emerging as an ESG criterion. GRI touts its new sustainability standard as the “first global standard for comprehensive tax disclosure at the country-by-country level”.

The GRI standard

GRI 207 has four components. Three ask for general disclosures about how the company manages tax, particularly “Approach to tax”, “Tax governance, control, and risk management”, and “Stakeholder engagement and management of concerns related to tax”.

The fourth and most specific component of the standard involves country-by-country reporting. For each tax jurisdiction where its entities are resident for tax purposes, a business is asked to disclose the following:

  • The resident entities’ names;
  • Primary activities;
  • Number of employees;
  • Revenues from third-party sales;
  • Revenues from intra-group transactions with other tax jurisdictions;
  • Profit/loss before tax;
  • Tangible assets other than cash and cash equivalents;
  • Corporate income tax paid on a cash basis;
  • Corporate income tax accrued on profit/loss; and
  • Reasons for the difference between corporate income tax accrued on profit/loss and the tax due if the statutory tax rate is applied to profit/loss before tax.

By its own terms, the standard applies only if a company determines that tax is one of its “material topics”, meaning a topic that is significant to the business’s stakeholders or in which the business has a significant effect on the economy, the environment, and/or society. For instance, a company that operates in only one jurisdiction might find that tax is not a material topic in its case and thus there is no need to publicly report on it. (Although geared mainly to multinational enterprises, GRI 207 can also be used by single-jurisdiction organisations, GRI says.)

For a fact sheet about GRI 207, visit GRI’s website.

While GRI’s standard is voluntary, the EU has been weighing whether to mandate large multinational companies to disclose country-by-country profit and tax to the public. The European Parliament approved a proposal in 2017 but, so far, the European Council has been divided over it.

Dave Strausfeld, J.D., ( is an FM magazine senior editor.