The climate crisis is this century’s biggest challenge and it affects all aspects of the global economy. Policymakers around the world are using various regulatory and market-based tools to facilitate a sustainable and just transition. Taxation is one of them.
In recent years, we have observed an increasing role for taxation in stimulating behavioural change among taxpayers. The European Commission has included a number of tax measures in the European Green Deal, such as the Carbon Border Adjustment Mechanism (CBAM), the Energy Taxation Directive (ETD), and the country-by-country reporting Directive (CbCR). The US Inflation Reduction Act (IRA) is also based on a wide range of tax credits and incentives that are meant to facilitate the US economy's sustainable transformation.
Sustainability has three main dimensions Environmental, Social and Governance (ESG), and taxation is an essential element in each of them.
Putting a price on carbon
Steering production and consumption choices in a greener direction
Incentivising more sustainable investments through tax exemptions
Ensuring that the right amount of tax is paid
Using tax revenue for infrastructure, education, health care, etc.
Ensuring clear tax policies and transparent tax reporting
Building trust between tax authorities and tax payers
The role of heads of tax and tax advisors in facilitating the sustainable transformation.
We believe that tax advisors should play a crucial role in proactively building the tax landscape, for the future. Corporate Tax Departments, supported by tax lawyers and tax advisors should ensure that each company’s tax strategy is aligned with the company’s overall sustainability strategy (including all ESG considerations), which in turn should also include the United Nation’s Sustainable Development Goals. Being aware of a company's tax "footprint" (how much taxes are paid, and to whom) and whether this is aligned with the policy intent, having the right risk control and management processes in place, and accepting accountability for the consequences of a company's actions are all part of good tax governance and an integral sustainable tax practice.
At WTS Global, we are on a sustainable journey and our goal is to contribute to the greater good through our own governance as well as our services. That is why we are investing in training our experts, facilitating the international exchange of knowledge through our Climate Protection, Green Tax & Energy Mindset Hub, and ensuring solid local practices in the ESG and taxation fields.
As trusted and leading tax advisors, we need to be aware of the developments affecting our clients and foresee future trends, so that we can help companies prepare for them. This goes beyond classic consultancy: it is the shift the industry is demanding, and we need to move in the same direction as our clients. We seek to be synchronized with the industry’s trends and concerns. It is time to innovate advisory for the greater good: to transform the tax advisory industry following industry’s transformation.
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