From the results of the CEO survey, it is clear that for many CEOs the purpose of their business is not simply to generate as much profit as possible for their investors but also to benefit their employees, the communities where they operate and society more generally. Increasingly, businesses are expected to develop products and services that enrich people’s lives and to do so in a way that is sustainable and takes into account the impact that they have on the societies in which they operate. Indeed, almost a quarter of CEOs report that they have updated their organisation's purpose in the last three years to take account of the broader impact that they have on society.
As Patrick Lenain of the OECD notes in his blog post of 5 February below, for many businesses their tax payments are one of the most significant ways that they contribute to society. However, the full extent of that tax contribution is not well articulated and is consequently not well understood. If businesses explained the full extent of taxes that they pay, and how they approach tax issues, would this help them to demonstrate how they generate value for a broader range of stakeholders, not just their investors?
In my view, an era of increased transparency is already upon us and it is being driven not only by stakeholder expectations or more stringent reporting requirements but by technology. Businesses the world over are being utterly transformed by powerful new technologies, which are in turn shaping their relationship with their stakeholders. When asked about the global trends most likely to transform wider stakeholder expectations of businesses in the next five years, 77% of CEOs globally cited technological advances.
The world of tax is in no way immune to the transformative power of technology. Taxing authorities are harnessing technology not just to collect routine tax data through e-filing but in more significant ways, and corporate tax departments are investing in technology to improve compliance and efficiency. Technology – and social media particularly – is forcing both businesses and taxing authorities to engage and respond to questions around tax in a clear and accessible way, and to a much wider base of stakeholders than before.
As CEOs look to meet the expectations of their stakeholders, a clear explanation of their contribution to society through the taxes that they pay will be critical. Providing proper context for all of their social, environmental, tax and economic impacts, business can help stakeholders understand the total impact of their tax strategy and contribution as an element of their total contribution to society.
Rick Stamm is the Vice Chairman, Global Tax. He was appointed to this role in October 2011. In his role, he is responsible for building the capabilities of Tax practices across the PwC network of firms, as well as for interacting on Tax and business issues with many of the firm's larger clients. Read more