Many top corporations unprepared for ESG tax reporting obligations

August 7th, 2023

Just a small minority of large US companies are able to share their total worldwide tax contributions, as pressure from stakeholders and regulators over ESG disclosure grows, a new survey from KPMG shows.

A recent survey by KPMG of 500 top executives at US companies with annual revenue of $1bn or more, found only 10% had processes in place to share total tax payments with regulators.

More than 60% of respondents noted they will have at least five years before they are mandated to disclose total tax contributions.

Nevertheless, the EU is pushing forward with country-by-country reporting for multinational corporations operating in the bloc by 2025.

And, in the US, the Financial Accounting Standards Board (FASB) recently released draft plans calling for more comprehensive income tax disclosures for public companies.

Some 54% of respondents said the complexity of gathering the necessary data across all jurisdictions was the main reason that they would be unprepared to disclose total tax contributions.

A further 33% of US execs said they did not have the technological capabilities to collect and collate the data, while a lack of analysts to make sense of the data was highlighted by 26% of respondents.

Respondents also highlighted considerable risks of collecting and collating country-by-country tax data, with some 42% highlighting the difficulty in attracting talent and a further 40% worried about giving away competitive intelligence.

“C-suite leaders need to prepare now,” KPMG noted. “It’s crucial they use their tax data to formulate their own narrative, rather than risk that story being told for them.”

Investing in technology, such as artificial intelligence (AI), that can make sense of data is a growing area of interest.

A clear majority (59%) of respondents said they are already leveraging AI in their tax or finance department, while 29% have plans to do so in the coming 12 months.

Further, 70% plan to invest at least $1m in the AI capabilities of their tax function over the next year, including 40% which plan to invest over $10m.