Aegon leads industry in tax transparency

Aegon was recognized as the leading financial services company to be ranked in the 2016 Tax Transparency Benchmark, published this week by the Dutch Association of Investors for Sustainable Development (VBDO).

2016 Tax Transparency Benchmark ReportWith the tax position of international companies increasingly under scrutiny by politicians, NGOs and the media, along with recent 'Panama papers' revelations, this year's Transparency Benchmark was particularly relevant.

The Benchmark, which ranked 68 Dutch listed companies in total, presents a clear picture of socially responsible tax governance.

Aegon's score increased from 14 in 2015 to 21 out of a possible 39 points in 2016, putting it among the biggest improvers in the index, and making it the highest scoring financial services company in the Netherlands.

Aegon ranks in the top five overall for tax transparency according to the VBDO. Over one third of the companies examined scored in the lowest transparency ranking.

2016 Tax Transparency Benchmark Ranking

Global Head of Taxation at Aegon, Martin Vink, puts the improvement down to the external publication of Aegon's tax policy in 2016. "As a company, we have always provided information about our tax policies in our Annual Report and Integrated Review – but the external publication of a new policy is a further step in conveying what Aegon means by acting as a responsible taxpayer," he says.

Governance principles

The report recommends that, "international companies see taxes not merely as a 'technical' matter but as part of the wider business picture, more specifically, as part of the role they have to play as corporate citizens. Not only because the growing public outcry indicates that tax behavior has emerged as a serious reputational risk – 'if a company is not transparent about its taxes, it must have something to hide' – but because creating shared value for both company and society is the only sustainable way to do business." This is a view that is strongly supported by Vink.

"A key governance principle is to set clear guidelines and policies relating to how we behave as a responsible company with a global reach," Martin says. "Our Global Tax Policy is linked to our Code of Conduct. It is also aligned with our new Responsible Business commitment: to act responsibly and to create positive impact for all our stakeholders."

The upshot, says Martin, is that we "not only take into account the letter, but also, when clearly discernible, the spirit of the law. The policy also provides the backbone of tax risk management and governance for our Global Tax Function."

Inclusion in the report is seen as a solid step towards increased tax transparency. But despite Aegon scoring so well compared to peers and other listed companies, there's still potential. Even the highest scoring company in the benchmark scored just 28 out of a potential 39 points.

Country-by-country reporting

Martin explains that there are plans in the pipeline to address transparency further: "As a next step in our aim to enhance tax transparency in our public disclosures, we want to inform our stakeholders about Aegon's Total Tax Contribution (TTC). This concept enables Aegon to communicate about all taxes paid – both borne by the company and collected on behalf of others – in our Annual Review (Sustainability Report) in a more transparent manner. For the first time, we plan to disclose Aegon's TTC in our 2016 Annual Review.

"As of this year, we will also report revenues and tax paid on a country-by-country basis. This information will be provided to the Dutch tax authorities and they will share it with other countries for complete transparency.

Explaining the numbers

"We feel confident in sharing this information as we already pay the right amount of taxes in the right places. The challenge however is around how we obtain all the required information and explain it to the tax authorities, given that tax numbers are not always easy to understand."

Understanding the rationale behind certain tax numbers can be complex for tax professionals, let alone the general public. And without a clear explanation, reported numbers can easily be misinterpreted or confusing. Because of this, Aegon is currently evaluating whether to disclose this additional information to the public.