Liz Fisher

A policy refresh is needed, since the perceptions of the role of business in society have changed.

Paying taxes, a new ACCA report points out, has been described as the price we pay for a civilised society.

In recent years, though, it has been harder to justify that statement, particularly when it comes to the taxation of businesses.

The Panama Papers revealed the scale of tax avoidance worldwide, adding momentum to concerns that the global corporate tax system, particularly in the digital age, is no longer fit for purpose.

The discussion has also put the role of professional accountants in the spotlight.

In April 2024, the global standards relating to tax services were incorporated into the International Ethics Standards Boards for Accountants (IESBA) Code of Ethics for the first time.

IESBA noted that the use of tax avoidance schemes can harm companies’ reputation and credibility as well as the public interest.

Taking IESBA’s code into account, ACCA has released an updated version of its regulatory and policy positions on the taxation of companies.

The report, Global Policies on Taxation of Companies: Principles and Practices, points out that much has changed since its policy position on tax was last updated in 2014, not least the perceptions of the role of business in society and the priorities of governments.

Wrong priorities

The report strongly argues that the current tax systems focus on the wrong priorities.

Multinationals dominate the business landscape, supported by legal systems that recognise businesses as legal entities in their own right.

"But the success or failure of these enterprises is measured through a series of abstract financial measures," says the report, and this has resulted in incentives that can drive "objectively undesirable" behaviour.

Taxation is based on the logic that maximising financial profits is the best outcome – but in today’s world, it is increasingly difficult to argue that prioritising profit will also produce the best outcome not just for the business and its investors, but for the environment and society as a whole. Decisions may be taken that meet the legal requirements of the business, but not the expectations of society, while decision-makers are distanced from the real-world implications of their actions.

Breakdown in trust

In recent years this has led to a breakdown in public trust and far greater scrutiny of companies’ tax arrangements.

Some regulators now require businesses to publish formal statements on their approach to taxes and tax planning. Many businesses have signed up to voluntary codes of conduct for their tax affairs.

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The report sets out ACCA’s regulatory position on the taxation of companies, which reflects IESBA’s code, but also goes beyond it in some areas, for example, by requiring advisers to advise clients specifically not to proceed with tax planning for which there is no credible basis in laws and regulations.

The report