A New ESG Metric: Tax Funded Impact

How Fiscal Multipliers Turn Fair Tax into Tangible Social Value

By Professor Chris Harrop OBE

In an era of fiscal constraint and rising public expectations, companies are under growing pressure to demonstrate not just profitability, but purpose with an emphasis on environmental and social impact. Indeed, the UK Corporate Governance Code (2018, revised 2024) requires premium listed companies to state their purpose, align culture with purpose, and explain how purpose underpins strategy.

As societies grapple with inequality, climate change, and the need for resilient infrastructure, the spotlight intensifies on how business interacts with the public good. Responsible tax conduct sits at the heart of this evolving social contract. It is no longer enough for companies to simply comply with the letter of the law; stakeholders ranging from consumers and investors to regulators and communities now expect organisations to contribute transparently and fairly to the societies in which they operate.

By paying the right amount of tax, in the right place, at the right time, businesses demonstrate a tangible commitment to the communities that support them. This responsible approach not only strengthens their social licence to operate, but also enables government to transform tax revenue into services and investments that foster long-term prosperity.

The Fair Tax Mark accreditation plays a pivotal role in this dynamic, serving as a visible hallmark of transparency, integrity, and social responsibility. For stakeholders whether investors, customers, employees or local communities Fair Tax status provides independent assurance that a company’s tax affairs are not only legally compliant, but also align with best practice in openness and fairness. This independent recognition helps to counteract cynicism around corporate tax behaviour, demonstrating that the business is proactively committed to the public good rather than merely avoiding scrutiny.

By signalling a clear commitment to ethical tax conduct, Fair Tax Mark accredited companies inspire greater confidence among stakeholders, strengthening relationships and reinforcing reputational capital. This foundation of trust is vital in today’s climate, where public and regulatory attention on corporate contributions is more intense than ever.

There is a significant opportunity for businesses to go a step further by actively leveraging fiscal multipliers to evidence and even amplify their contribution to social value. By quantifying the downstream effects of their tax payments, companies can make a compelling case that their responsible tax conduct is not merely a compliance exercise but a catalyst for positive economic and social transformation.

Integrating fiscal multiplier analysis into corporate reporting can enable businesses to translate units (Pounds, euros, dollars, etc) of tax paid into measurable public good. For example, by referencing established economic research and OBR models, a company can estimate how its tax contributions help generate GDP growth, support jobs, and finance essential services. This approach allows organisations to draw a direct line from fair tax behaviour to tangible improvements in educational outcomes, infrastructure development, and environmental progress.

Moreover, by embracing fiscal multipliers as part of their sustainability or ESG reporting, businesses can move beyond abstract notions of purpose and provide stakeholders with transparent, data-backed insights into their real-world impact. Such disclosures not only strengthen credibility with investors and customers but also foster a deeper sense of partnership with the communities they serve.

In short, fiscal multipliers offer a powerful, underutilised tool for companies to demonstrate that their commitment to fair tax is intrinsically linked to the creation of lasting social value, making the case for responsible tax conduct not just as an ethical imperative but as a strategic driver of shared prosperity.

What does this mean for responsible tax conduct? Quite simply: your tax payments don’t just fund government, they fuel GDP, jobs, and drive social value.

Fiscal Multipliers

Fiscal multipliers quantify the ripple effect of public spending. In the UK and across G20 economies, public investment typically yields multipliers between 1.2 and 1.8, meaning every £1, $ or € of tax-funded infrastructure, education, or green investment can generate up to £1.50 in GDP. On the downside debt repayments have a ‘very low multiplier’ of 0.3, which, whilst not being a negative multiplier, these debt repayments dilute the social value of tax-funded impact. Responsible tax conduct helps reduce fiscal pressure and unlock more productive investment.

In the UK, fiscal multipliers are modelled and validated by the Office for Budget Responsibility (OBR). Their methodology is published in the OBR’s Fiscal Multipliers Archive and explained in depth by the Institute for Government’s technical briefing.

Across the G20 and developed nations, a range of fiscal multipliers have been created by the IMF, the OECD, the ECB and various other studies.

A New ESG Metric: Tax-Funded Impact

Imagine a company paying £10 million in UK corporation tax. If that contribution is allocated proportionally across government spending categories, here’s how it breaks down, and the estimated GDP impact using fiscal multipliers:

Thus, a company’s tax impact and social value statement could read: “Our UK £10 million corporation tax contribution helped generate an estimated £11.8 million in GDP, supporting public services, infrastructure, education, and the green transition.”

This framing allows companies to:

• Quantify their fiscal footprint using government-validated multipliers
• Align tax transparency with ESG and social value reporting
• Demonstrate how responsible tax conduct contributes to national prosperity

Multinational Corporations: Building a Global Tax-Funded Impact Metric

For multinational businesses, this approach can be scaled across jurisdictions to create a unified ESG metric.

While no single IMF paper covers all G20 countries in one comparative framework, the IMF’s Fiscal Monitor series and World Bank macroeconomic policy papers regularly publish multiplier estimates and country-specific analyses.

These are often grounded in empirical data and updated to reflect post-COVID dynamics. For developing countries, a good paper is the www.set.odi.org/wp-content/uploads/2022/01/Fiscal-multipliers-review.pdf

Step-by-Step Approach:

1. Disaggregate tax payments by country (corporation tax, payroll taxes, VAT, etc.)
2. Apply country-specific fiscal multipliers, available from national finance ministries, IMF databases, or OECD modelling
3. Estimate GDP impact per jurisdiction using proportional allocation across government spending categories
4. Aggregate results into a global Tax-Funded Impact dashboard for ESG reporting
5. Disclose methodology and assumptions to build stakeholder trust and comparability

This enables multinationals to demonstrate how their tax contributions support public investment, inclusive growth, and climate resilience across their global footprint.

“Our global tax footprint helped generate an estimated £XX million in GDP growth across the countries we operate in, supporting education, infrastructure, and social value.”

Coming Soon: The Tax Advantage

This blog draws on insights from my forthcoming book, The Tax Advantage, which explores how responsible tax conduct can become a strategic asset, driving brand trust, investor confidence, and measurable social value. It offers practical frameworks, case studies, and diagnostic tools for business leaders ready to turn tax into a lever for competitive advantage.

Responsible tax isn’t just about avoiding risk, it’s about creating value. By embracing fiscal multipliers and social value metrics as part of your ESG narrative, you can show how your business helps build the economy and society it depends on.

That’s not just good ethics, it’s good strategy.