Recent developments

Over the last couple of years, quite a number of parties, besides the tax authorities, have been interested in the amount of tax that multinational enterprises pay. The media has reported numerous stories about tax avoidance and/or companies failing to pay their "fair share" of taxes. In addition, various non-governmental organizations ("NGOs") have published reports on aggressive tax planning structures. And even consumers have started to show an interest in the amount of taxes paid by multinationals.

Multinationals are currently in the eye of the storm. Their allegedly aggressive tax planning practices have led to public outcry. Politicians have shared this public sentiment, sometimes even accusing these multinationals of "immoral" behavior. New rules, such as country-by-country reporting requirements, are being implemented, resulting in further transparency on multinationals' tax positions. What should multinationals do and what are they obliged to do according to their Corporate Governance Model?

Implications for Multinationals

The concept of Corporate Governance deals with how to run a company. What Good Corporate Governance entails in detail is not always to be found in legal rules. In many jurisdictions sets of rules and principles have been brought together in the form of a self-regulating code on how to run a company. Within multinationals the role of taxes has been with the company's tax group, mainly under the supervision of the CFO. However, under Good Corporate Governance, it is important that the company’s tax policy is also considered by the board and addressed on the agenda of the supervisory board. Moreover, the members of the audit committee will have to supervise the existence of the policy and form an opinion on its primary objectives. Following all developments, a more critical and active role in this respect will be required: not only on the existence of the tax policy and its compliance with new developments, but also on its implementation and subsequent monitoring of its application. The aforementioned should, for most multinationals, result in a review and possible update of their existing tax policy including a good debate with the board on its content. Such debate should also cover the dilemmas of having a Good Tax Governance.

What are dilemmas for Good Tax Governance

Most multinationals are aware that they should reconsider their tax policy and actively discuss it with their board. Recent media publications and transparency, such as in Luxembourg or more recently the leak of the Panama Papers, have created further awareness on the risk of (aggressive) tax planning. Without doubt most multinationals cannot be considered aggressive tax planners and want to include this in their tax policy. However, the risk of multinationals becoming more transparent their tax positions and tax morality also causes some dilemmas, including:

  • A multinational can be more transparent but this may not fit in with an environment of increasingly aggressive tax authorities.
  • Multinationals operate internationally, while tax authorities with different "ethical" views operate nationally.
  • How tax incentives provided under certain tax regimes fit in with the "fair share" discussion.

Each corporation needs to assess these dilemmas to make a step towards Good Tax Governance and before taking further actions.

Actions to consider

In our view, tax position and tax policy should be on the agenda of the board. Multinationals should test whether their tax policy is sustainable taking into account all developments on the morality of a corporation's tax position and in view of increasing transparency.

Multinationals should think about guiding principles for Good Tax Governance, which should include:

  • Clarity and transparency on the tax strategy, which should include the company's vision and objectives for its tax policy.
  • Being explicitly clear that tax is an integrated part of doing business and that it is not the exclusive domain of the tax department.
  • Respect of the law and the spirit of the law.


Good Tax Governance is on the move. With the media, NGOs, authorities and the general public playing an important role in making tax planning more transparent, multinationals should review and possibly adapt their tax policy in the countries in which they operate. They should also make it clear that their tax policy is understood, supported and accepted by their governing bodies, such as the board, supervisory board and audit committee. In view of all developments on transparency, action should be taken sooner than later.