Peter van Dijk
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A responsible tax policy has become a key component of a company’s Environmental, Social, and Governance (ESG) strategy. This article addresses three key questions about responsible tax policy.
What are the main benefits and disadvantages of a responsible tax policy?
The main benefits of a responsible tax policy for companies include reputational advantages and enhancement of control and strategic guidance. Through a responsible tax policy, companies can demonstrate to investors, customers, employees and governments how they contribute to society through compliance with tax legislation and payment of taxes. The effectiveness of reputational advantages may be increased if specific guidelines are applied such as the
GRI 207: Tax 2019 or the guidelines published by VNO-NCOW. Another benefit of a responsible tax policy is that it can help to enhance control and reduce tax risks through identification of responsibilities (which parties are responsible for tax compliance) and guidelines to refrain from aggressive tax behavior (which often results in increased risks for tax controversy).
A responsible tax policy is currently not mandatory but can be a useful part of an overall ESG strategy. Disadvantages of the publication of a responsible tax policy may be reputational risks (e.g. if the responsible tax policy would not be applied in practice or if the responsible tax policy would not demonstrate a sufficient contribution to society) and financial risks since it may limit options legally available and trigger additional questions from tax authorities and civil society (e.g. press and NGO’s).
What topics are typically included in a responsible tax policy?
A responsible tax policy usually consists of the following topics:
Which sources are typically used to share a responsible tax policy with stakeholders?
The sources used to share a responsible tax policy depend on the tax strategy chosen by a company. If a more cautious strategy is pursued, a responsible tax policy is typically only shared with stakeholders upon request. In a more ambitious strategy, a responsible tax policy and annual information is shared via the companies’ website and through social media accounts.
This article was previously published on the website of
GCN General Counsel Netherlands.
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