G20 china_web

ADVOCACY
KPMG
The global
state of tax
It is in the court of
public opinion that
solutions have to
be negotiated
While the global markets may
have slowly recovered from the
financial crisis of 2008, there
are many lingering reminders
of its impact across politics,
policy and business. Tax, together with the role of
Multinational Corporations (MNCs), has often been
in the firing line. Most recently, the Panama Papers
emphasised public cynicism and hostility towards
big business, while the Brexit decision – at least for
some commentators – was as much about society’s
rejection of so-called establishment “elites”, as it
was about whether or not the UK should remain in
the European Union.
As public trust remains fragile, MNCs continue
to operate in a volatile stakeholder environment,
characterised by uncertainty and a significant
disconnect between economic and
political institutions and the societies in
which they function. Tax is frequently the
prism in which the relationship between
big business and society is viewed.
Tax matters
Tax, at its most fundamental level, is the
entry fee we pay for a civilized society.
Trust between all stakeholders and
players in this social contract is based
on the foundation of responsible tax.
Responsible tax behaviour should
therefore be an integral part of governments and of all
socially responsible businesses that seek to earn and
maintain society’s trust and citizens’ respect.
Advances in globalisation, financialisation,
and digitalisation, however, have created unstable
conditions: where money flows freely across borders
and legislation struggles to keep pace, it can result
in mismatches and legal anomalies (sometimes
characterized as "loopholes") that are complex to the
point of opacity. At the same time, similar advances
facilitating the free flow of information have made
public suspicion and scrutiny all the more intense:
citizens and society have the tools to hold businesses
to account – sometimes aggressively so. Businesses
can no longer expect to impose or receive public
support just by stating that what they do is within the
strict letter of the law – they must also consider the
context in which we all live and operate. Tax remains
a legal duty but, in the court of public opinion, it
also has a clear moral or ethical dimension. It is in
the court of public opinion that solutions have to be
negotiated, not imposed.
This question or challenge of tax responsibility,
which is always subjective, makes policy and
decision-making more complex still. While KPMG
in the UK has publically available Tax Principles
in place to help guide [its ]tax professionals, KPMG
can neither impose nor lay claim to any easy
solutions – it has discovered in a two-year project
on Responsible Tax, in the UK.
Responsible tax – learning from the UK
Acknowledging and embracing the complexity
of the situation, were the first steps in bringing
to life the Responsible Tax for the Common Good
project. Launched in 2014, the project now involves
a stakeholder community of more than 700 –
including 100-plus active members – drawn from
corporations, advisory firms, government, regulators,
NGOs and civil society. Importantly, a number of
these are harsh critics of the status quo and of the
corporations and their advisors that some see as the
source of the problem, not the solution. In the spirit
of radical transparency, KPMG has opened up the tax
subject for discussion, and encouraged constructive
dialogue between multiple stakeholders to determine
responsible ways forward. Dissenting voices have
been especially welcome. Greater trustworthiness
between the various parties has been built through
this demonstration of reciprocal vulnerability.
The UK Responsible Tax movement continues
to attract new voices, and – among many initiatives
– recently led to the creation of the first All Party
Parliamentary Group (APPG) on Responsible Tax in