Tax Executives Confident in Understanding Tax, ESG Connections

Most tax executives who are actively involved in business decision-making say their companies understand well on how tax intersects with their environmental, social, and governance strategies, a new study shows.

The vast majority, 84% of “tax strategists” considered to be actively involved in a company’s key business areas including mergers and acquisitions, ESG, and economic resilience, said their organizations have a strong understanding on how tax intersects with ESG strategy, according to BDO USA LLC’s survey released Wednesday.

The global accounting firm surveyed 150 senior tax executives and grouped respondents into two categories— “tax strategists” and “tax tacticians” — categorizing strategists as those more involved in business decisions.

• “ESG risks and stronger reporting requirements” are among the most significant tax-related challenge organizations will face over the next year for a third of surveyed tax executives. Tax executives said the biggest challenge would be a substantial increase in Internal Revenue Service funding. Complying with new customs and trade rules and transfer pricing audit activity globally were also key areas surveyed tax executives were paying attention to.
• Almost half of tax executives cited “quantitative disclosures” as bulk of their ESG work. With increasing calls for ESG, “having access to data across the business will help the tax department create accurate disclosures,” the survey said.
• About a quarter of tax executives said data collection and analysis is their greatest challenge to ESG-related tax transparency reporting. About a fifth cited staffing constraints and misalignment with organization’s non-tax ESG leaders as potential challenges to ESG-related tax transparency reporting.