Tax Transparency & Sustainability

Growing interest but divergent approaches confirmed in webcast polling results

Michael Liu

Michael Liu

Principal, International Tax, KPMG US


Matt McNeill

Matt McNeill

Principal, International Tax & Value Chain Management, KPMG US


July 19, 2021
| Driven by growing interest among company stakeholders about tax transparency and how companies govern their tax policy, U.S companies are increasingly focused on the convergence of tax and environmental, social and governance (ESG) principles. On a May 7, 2021, KPMG Tax Governance Institute webcast, ESG and Tax Convergence: Focus on Tax Transparency and Governance, company executives who attended responded to several polling questions,1 about what they are doing to evaluate the connection between ESG and tax transparency strategy and sustainable tax policies at their organization.

Polling results

Moving further along on the sustainable tax journey

Q: What is your company's next big "to-do" for your sustainable tax initiatives? n=458

More than half (53%) of the execs are underway in building their substantiable tax initiatives—enhancing their tax governance, increasing transparency around taxes paid, or both, while 29% reported that they are just getting started in developing their approach.

When the same polling question was asked in January [read State of Sustainable Tax, January 22, 2021 polling results], 45% of execs reported as being underway on their sustainable tax journey. In other words, by May, there was a 18% increase in percent of execs indicating that they were beyond the getting started stage, and the percentage of execs who were doing nothing dropped (from 25% in January to 18% in May), a 28% decrease in percent of execs.2

KPMG IMPACT Tax Leader Michael Liu comments, “The pace of action appears to be increasing. Over a few months—from January to May—companies appear to be moving along the spectrum with more being active in the ‘building’ stages' and fewer waiting to get starting on sustainable tax measures."



> Do nothing . . . . .

> Getting started . . . . .

> Building . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


No sustainable tax initiative

Developing strategy/principles

Enhancing tax strategy governance

Increasing transparency around taxes paid

Both enhancing governance and transparency

Sustainable tax: What's influencing action?

Q: What factor will most influence you to do more around sustainable tax? n=434

While regulators have always and will continue to influence company behavior, customer and investor are expectations are driving more company action around sustainable tax. More than 40% of the execs—greater than the 35% who attributed action to alignment with ESG commitments generally—indicated that their sustainable tax initiatives are driven by their investor and customer expectations, compared to 12% who indicated that regulators are behind their sustainable tax initiatives.

More than twice as many respondents noted that investor expectations (28%) are influencing action around sustainable tax when compared to those influenced most by customer expectations (13%). “The reasons for this are likely varied,” posits KPMG IMPACT Tax leader Matt McNeill. “One explanation could be the makeup of the respondent pool: businesses that target other businesses, your B-to-B companies, may be less influenced by customer expectations than their business-to-consumer (B-to-C) counterparts.”

The remaining execs indicated a more “wait-and-see” position with 12% reporting that they plan to do only what is necessary to minimize attention that could be garnered by too much or too little activity in the sustainable tax space. Further analysis revealed that among the “wait-and-see” respondents, tax execs are more conservative and more inclined to take this “middle of the herd” position than non-tax executives. 






Aligning our tax strategy with our ESG commitments

Meeting investor expectations

Meeting customer expectations

Actions required to “stay in the middle of the herd”

Only regulatory action will cause us to do more

Responding to rating agencies about tax 

Q: Within your organization, who completed ESG rating agency questionnaires with respect to tax? n=263

Many ratings agencies now include tax data in their ESG scores. Some use only publicly available information, while others send questionnaires giving companies the opportunity to respond or provide insight to help with their ESG scores. Yet, in our polling results, 34% of all execs and 41% of tax execs responded that they were unaware of such questionnaires or that ratings agencies included tax as part of their ESG scores.






I didn’t know we received an ESG ratings questionnaire or that it included a tax section.

Our Investor Relations, ESG, or similar teams complete these questionnaires.

Our Tax group completes the tax section of these questionnaires.

We respond to these questionnaires but not respond to the tax section.

No, to disclosing all

Q: What would you be least likely to include in a public tax strategy? n=412

Polling respondents reported they were least likely to want to disclose specifics on company tax risk appetite (34%) or their position on voluntarily disclosing how much tax the company pays and where (24%). Fewer respondents found disclosing more general tax strategy information less objectionable.






Our tax risk appetite, defined by a minimum level of comfort2 if challenged

Our position on voluntarily disclosing how much tax we pay and where we pay it

A description of how we engage with tax policy makers

A description (process and procedures) of how we manage tax risk

Our tax principles

Country-by-country reporting is (not) the answer to ESG tax transparency demands

Q: Would public country-by-country tax reporting satisfy ESG stakeholders? n=548

As country-by-country (CbyC) reporting gains more interest among various jurisdictions, with Europe leading the way, execs are split on whether public CbyC reporting would satisfy the demand for tax transparency among ESG stakeholders. The numbers of respondents answering “no” were marginally more than those who said “yes.” 

Further analysis of polling respondents revealed that 54% of tax execs are NOT in favor of public CbyC reporting. Compared to other execs’ responses, twice as many tax execs believe CbyC reporting would be misunderstood and cause stakeholders to reach false conclusions, and 50% more tax execs believe the data would exacerbate the “paying fair share” debate.






Yes, because it would be a significant force to ensure that companies act responsibly in their tax affairs

Yes, because it would shift attention to other ESG topics such as climate reporting

No, because stakeholders would reach false conclusions because they cannot understand the data

No, the data would just add more “fuel to the fire” that corporations do not pay a “fair share” of tax

Other than reasons provided above, undecided, or don’t know


[1] Response percentages may not add up to 100% due to rounding. The majority (89%) of polling respondents were U.S.-based execs. Functional breakdown of respondents: 46% work in the tax function; 34% work in the finance function; 2% are board members; and the balance (18%) work in another function. 

[2] (53% - 45%)/45% = 18%; (18% - 25%)/25% = -28%

[3] For example, "more likely than not"