South Africa’s top 100 companies are making strides in voluntary tax disclosure and there is an increasing awareness of responsible tax behaviour globally, as well as rigorous scrutiny from regulators and other stakeholders, while the Covid-19 pandemic and economic uncertainty have fuelled the public debate on tax and tax transparency, says advisory multinational PwC Southern Africa.
These are the key findings from a review of the voluntary tax reporting for the financial year ending December 31, 2019, of the top 100 companies listed on the JSE, PwC Southern Africa tax reporting and strategy lead Troopti Desai points out.
On average, companies scored 49%, compared with 38.5% in 2018, for effectively providing transparency of taxes and for integrating it with other company-related disclosures to provide a sense of value reporting on tax disclosure.
PwC says it is notable that multinational companies made a marked increase in voluntary disclosure at 29%, up from 19% in 2018, compared with national companies, which averaged 20% in 2019, up from 13%.
“It is notable that at least 14 companies participating in the 2019 study demonstrated a clear understanding of how to effectively provide transparency of taxes - easy to find and well communicated - compared to just seven companies in 2018. Furthermore, in 2019 at least ten companies demonstrated integrated tax related disclosure with other company related disclosure, which provides a sense of value reporting on tax disclosure and how it integrates with and relates to the business, compared to seven in 2018.”
Despite the fact that the King IV Report requires a company’s governing body to be responsible for a tax policy that is not only compliant with the applicable laws, but that is also congruent with responsible corporate citizenship and that takes account of reputational repercussions, there was little improvement in the appetite of companies to disclose their tax strategy publicly at 34%, up from 32% in 2018.
There is, however, an increase in the number of companies that indicate that the governing body assumes responsibility for the tax strategy, which increased to 44% from 27%.
“Approach to tax planning, views on aggressive tax strategies and use of tax havens have been areas of intense scrutiny over the years and continue to attract strong interest from tax authorities, civil society organisations, environmental, social and governance analysts and the wider public.
“More companies have discussed their approach to tax planning and minimising tax liabilities, although the transparency of this criteria remains low. It is concerning to note that fewer companies have expressed their views on aggressive tax strategies and there has also not been a considerable move towards more disclosure on policies for use in tax havens, at 14% up from 12% in 2018. The number of organisations that disclosed the circumstances surrounding uncertain tax positions or tax controversy exposure remained the same at 31 companies,” says Desai.