Tax and Sustainability Study 2022/2023 - A qualitative analysis of the regulatory environment complimented by empirical insights

The study follows two major goals: (1) Analyzing and benchmarking Standard-Setters’ frameworks and Rating Agencies’ methodologies and (2) Receiving internal stakeholders’ opinions on the topic of sustainable taxation. Accordingly, the following structure will guide through relevant findings and conclusions:
• Section 4 and section 5 focus on the analysis of the Rating Agencies’ approaches and bench-mark the Standard-Setters’ recommendations.
• Section 6 illustrates how Rating Agencies’ methodologies and Standard-Setters’ recommendations are connected.
• Section 7 continues with the results of the stakeholder survey.
• Section 8 concludes with the overall takeaways and how the future could look like.
The key takeaways of the study can be summarized as follows:
1. Rating agencies and Standard-Setters are not entirely clear about what their actual goal is in tax:
• Rating agencies apply very different approaches to measure the tax performance of multi-national enterprises (MNE). Both the metrics used but also the overall value attributed to the tax performance differ significantly.
• The large number of 93 recommendations results from the highly unaligned approaches to sustainability standards. E.g., while some focus on a wide variety of recommendations on tax governance, others completely neglect the topic or choose different recommendations.
• A key reason for the current patchwork in the area of ESG and taxation is that both Rating Agencies and Standard-Setters follow two partly concurring goals. One is to reduce both financial and reputational risks, and the other one is to measure the impact an enterprise has on the SDGs.
2. In this context there is no clear direction or theme for enterprises to follow regarding sustainability standards and ratings. However, the following remarks can be made:
• Some recommendations in tax governance might indeed be an effective tool to reduce financial risk.