GRI and NSE Promote Tax Transparency and Sustainability in Nigeria

Tax is a compulsory contribution to state revenue, levied by governments on workers’ income and business profit, or added to the cost of some goods, services, and transactions. Taxes are levied in almost every country of the world, primarily to raise revenue for government to meet public expenditures and are key mechanisms by which businesses contribute to the economies of the countries in which they operate and the Sustainable Development Goals (SDGs).

To support government effort, enhance the role of tax in fostering sustainable development, and in response to growing demands for tax transparency, Global Reporting Initiative (GRI) developed the GRI Tax Standard (GRI 207: Tax 2019) – the first global sustainability standard for public country-by-country reporting on tax to help businesses to better understand and communicate their tax practices publicly.

To further understanding of the tax standard which was designed by the independent, multi-stakeholder expert-driven body, the Global Sustainability Standards Board (GSSB), in sub-Saharan Africa’s most influential country, Nigeria, the GRI partnered with the Nigerian Stock Exchange (NSE) to organise a session which held on Tuesday, 30 June, 2020. The session was led by leaders in tax and sustainability, including Douglas Kativu, Director, GRI Africa; Bola Adeeko, Divisional Head, Shared Services, NSE; Taiwo Oyedele, West Africa Tax Leader, PwC; Vaishnavi Ravishankar, Senior Analyst ESG, PRI ; Mia D’Adhermar, Senior Manager, GRI; and Ugochi Obi, Head, NSE X-Academy.

Bola Adeeko set the stage when he welcomed participants to deliberate on tax regulations, potential implications for taxpayers, as well as how organisations can adopt global best tax practices. According to him, the calls on countries to step up their efforts to achieve more effective domestic resource utilisation and mobilisation contributed to the development of the GRI 207: Tax 2019 Standard, which would help address global demands for tax transparency.

He hinted that the NSE’s plans to assume a new tax regime upon the completion of its digitalisation process which will see it fully becoming a profit-making venture, and will promote tax transparency within its ecosystem through support to listed companies and dealing member firms, and offer recommendations regarding transparency in tax disclosures in the NSE Sustainability Disclosure Guidelines (NSE-SDGs), which was in the first instance, designed with the GRI team.

According to Taiwo Oyedele, statistics on a citizens and companies tax perception survey that sampled over 400 opinions across Nigeria, revealed that only 17% citizens and 31% of large and small businesses agreed that tax evasion is wrong and punishable, which shows that most individuals and businesses don’t believe in paying taxes in Nigeria, citing a lack of trust in government and tax officials, dissatisfaction with social services, complex tax process, and poor health and education system as reasons for their non-commitment. He highlighted the challenges that tax authorities face to include inconsistent policies, limited resources, unrealistic targets; and political interference. Nigeria’s scorecard shows that there is high level of tax evasion, low tax to GDP ratio, low but rising debt, unsustainable debt service to revenue ratio and low interest among investors seeing as they fail to ask questions around tax governance.

Oyedele further hinted that 99.2% of government revenue in the first quarter of 2020 went into debt servicing and that the solution to the challenges around the tax space in Nigeria should focus on addressing tax governance and accountability, tax compliance and public disclosure of all payable taxes, aroused investor interest in the demand for tax transparency and disclosures, fixing the already weak tax structure and tax governance and enhancing public awareness on taxes; all problems that may be addressed if the GRI Tax Standard is judiciously utilised by corporate entities.

Vaishnavi Ravishankar pointed out that the importance of tax responsibility has been brought to the fore by the crisis the world faces today in irreversible ways and called for the nations to brace ourselves for the impacts because inequality will rise, and institutions will experience some setbacks in our global ability to achieve the SDGs. According to her, global governments lose between 100 to 600 billion dollars in taxes annually, while developing countries lose about 130 million dollars in taxes. And that tax avoidance can lead to lawsuits, public distrust, and reputational damage, while tax minimisation can result in poor decision making at board levels and can affect broader portfolio returns and economic conditions.

She ended by calling for enhanced tax transparency towards achieving responsible tax behaviours and called on institutional investors and stakeholders to hold businesses to account on tax practices.

As is the custom of the GRI hinged on inclusivity and accountability, the GRI Tax Standard was developed following public calls and stakeholders’ interests around the topic of improved tax transparency. One of the unique features of the GRI:207 Tax 2019 is that it combines the use of management approach disclosures – disclosures that show a companies’ particular approach to dealing with a subject – on specific aspects, such as tax strategy, with public country-by-country reporting.

Where typically, tax information in annual reports is limited to aggregated figures, meaning that if a business is operating across more than one country, it is really not possible to identify the tax that they pay or the profit they make in a single country level jurisdiction, Mia D’Adhermar pointed out that there are growing concerns around strategies, policies and governance that businesses ought to have in place around their tax system, limitations which the new tax standard seeks to address.    

It is clear why many entities across the world strongly support the  GRI’s vision of empowering decisions that create social, environmental and economic benefits for everyone, and this tax standard presents another opportunity for businesses to consciously contribute their legal quota to sustainable development by paying taxes, establishing governance and control frameworks around tax management, and publicly disclosing tax information.