Aegon leads sector on tax transparency

In the 2017 Tax Transparency Benchmark, published this week, Aegon was ranked second out of 76 Dutch listed companies, and first in its sector.

2017 Tax Transparency BenchmarkWith the tax position of international companies increasingly under scrutiny by politicians, NGOs and the media, not to mention the reputational damage inflicted by the 'Paradise papers', this year's Transparency Benchmark was particularly relevant.

The Benchmark, published by the Dutch Association of Investors for Sustainable Development (VDBO), ranked 76 Dutch listed companies to present a clear picture of socially responsible tax governance.

Aegon's score increased from 14 and 21 points out of 39 in 2015 and 2016 respectively, to 25 out of a possible 37 points in 2017. This was against an average of 13.4 points in 2017 for all companies. This score places Aegon in joint second place overall: the highest scoring financial services company in the Netherlands. This is a considerable achievement, in a benchmark where the average transparency rating of companies in scope also increased from 32% in 2016 to 36% in 2017.

Global Head of Taxation at Aegon, Martin Vink, says the improvement is partly due to the publication of Aegon's tax policy in 2016 and the disclosure of Aegon's Total Tax Contribution (TTC). "As a company, we have always provided information about our tax policies in our Annual Report and Integrated Review – but the publication of our new policy has been a further step in conveying what Aegon means by acting as a responsible taxpayer," he says.

"Last year, for the first time, we disclosed an overview of Aegon's TTC in the Annual Review (Sustainability Report)," he says. The TCC is a concept enabling Aegon to communicate about all taxes paid – both borne by the company and collected on behalf of others.

The report recommends that companies shouldn't wait for 'leaks' or 'papers' to be published, but take a more pro-active stance by becoming more transparent about their fiscal activities. Furthermore, it states that fiscal transparency is merely the first step towards more responsible behavior.

Companies, it suggests, need to align their tax strategy with their corporate social responsibility strategy. In this way, companies not only send out a consistent message, but also contribute their fair share to the societies in which they operate. This is a view that is strongly supported by Vink.

Governance principles

"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 updated 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."

"Since 2016, we have also reported revenues and tax paid on a country-by-country basis. This information is provided to the Dutch tax authorities and they will share it with other countries for complete transparency," he says.

"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 also disclose this additional information to the public.

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 to grow. Even the highest scoring company in the benchmark scored just 28 out of a potential 39 points.

Best practice

Aegon was singled out as an example of best practice in the report, in the area 'Tax must be aligned with the business and is not a profit center by itself', for providing a year-on-year comparison, with detailed notes. "Without doubt, we will continue to improve on our reporting where appropriate and possible," confirms Martin.