Corporate Tax Planning: ESG and Corporate Tax Planning

Abstract

Environmental, social, and governance (ESG) is a framework for considering certain risks and opportunities applicable to a company. Investors, and increasingly regulators, are requiring disclosure of certain ESG-related metrics and data. Some of these data reflect the externalities that a company creates with respect to the environment and to society. Investors, and potentially regulators and governments, can use these data to evaluate the company and price negative externalities. Being prepared and proactive will allow a company to develop a tax strategy that is consistent with its larger ESG goals. Globally, there is an increasing obligation for companies to publish a tax strategy, as well as to disclose uncertain tax positions and aggressive tax planning to the tax authorities and the public. This trend is also making its way into Canada, albeit at a slower pace. As the Canadian government and investors move toward pricing negative externalities using ESG metrics, it is crucial that Canadian companies start to consider the role of ESG with regard to tax planning, if they have not done so already. Canadian companies should also consider how their tax strategy will be perceived by the company's stakeholders, including the public, clients, and employees.