Tax has an enormous social impact – so where’s the reporting? 

Fair Tax Mark businesses know that paying the right amount of tax, in the right place, at the right time, has an enormous positive social impact.  

Tax contributes to vital public services such as healthcare, transport, policing, education and defence. And, if tax avoidance rules are well crafted and properly implemented, businesses can compete efficiently and add to economic prosperity.

“We recognise the public services paid for through tax benefit our members, colleagues and communities, and help create the strong foundations we need to thrive as a business in the long term,” Leeds Building Society CEO Richard Fearon told us when the business was first certified in 2018. 

Similarly, Emma Robinson, Compliance Coordinator at Suma, said: “It’s right that we contribute to the public services we rely on to operate, like road and rail infrastructure, but also the institutions we depend on as members of the community, from the NHS to our schools, libraries and the police.”  

Social impact reporting 

Encouragingly, such progressive attitudes are now making their way into the wild west of social impact reporting (ie., the structured process by which business measure, assess, and communicate the social, environmental, and economic effects of their activities).

The Global Impact Investing Network’s impact measurement system, IRIS+, is one of the most comprehensive tools on the market. It contains a metric, ‘payments to government’, which includes corporate income tax. It can also capture additional reporting on a variety of other business taxes.  

When it comes to frameworks, ‘civic capital’ is one measure of a business’s net social contribution and can include how a company approaches their taxes. And the International Council on Mining and Metals’ Social and Economic Reporting Framework uses country-by-country tax reporting as a core indicator of a company’s social impact. 

Businesses themselves are also starting to include fair tax as an impact in their wider sustainability reporting. For example, Fair Tax Mark certified multinational AgroFair’s 2022/23 report read: “Where applicable, we pay national taxes due correctly and on time, thus contributing to the development of our communities.”  

But we would like to see more impact reporting frameworks include metrics for fair and responsible tax, as well as more businesses recognising the social impact their tax contributions can have.  

Upcoming regulation 

Not only do we want to see this because we believe it is right, but it also allows businesses and their investors to get ahead of upcoming regulation.  

The EU’s Corporate Sustainability Reporting Directive (CSRD) will require 10,000 large businesses to not only disclose how they are impacted by sustainability factors, but also to explain how their business activities impact the environment and society. This is known as double materiality.   

When completing a materiality assessment under CSRD in which to demonstrate both those impacts, businesses can report on taxes paid to illustrate the latter. Although there is no out-and-out requirement to do so, many professional services organisations such as KPMG, PwC and Deloitte argue that tax is very much a material issue.  

Corporation tax is a crucial source of revenue to governments around the world, and as Fair Tax Mark businesses know, this can be vital to their communities and society.  

As Ecology Building Society said: “Tax is an important part of our contribution to society and helps reduce inequalities, which have an environmental cost. This plays a vital role in helping to delivery our mission to build a greener society.”