Insights covered in this issue

In this first edition of 2024, we focus on two different aspects of ESG in tax: on the one hand, Country-by-Country reporting, tax transparency, and the issue of tax washing. On the other hand, carbon pricing and taxes, with a look at lessons from the first CBAM reporting quarter, and the recent publication of a proposal for carbon tax in the agriculture sector in Denmark.

The EU Directive on public Country-by-Country reporting (pCbCR) has been implemented in the Danish Financial Statements Act and will soon impact the first Danish companies, as the preparation of pCbCR becomes mandatory for financial years beginning on 22 June 2024 or later. Therefore, we will walk through the legal requirements introduced by the Directive and examine how some of the biggest Danish companies have so far reacted in their disclosures for FY2023.

In a nutshell, the rules introduce a requirement for Danish based groups with a turnover exceeding DKK 5.6 billion and some subsidiaries or branches of non-EU based groups to prepare a report containing a subset of their Country-by-Country report (CbCR) that includes most of the data points for all EU and EEA member states (i.e. including Iceland, Liechtenstein, Norway), countries on the EU Blacklist on 1 March in the financial year and some grey list countries as well as numbers for the rest of world aggregated. The report must be submitted to Erhvervsstyrelsen in a machine-readable format, who will publish the reports, and the companies will have to publish a link to the report on their websites.

In addition to certain master data, e.g. which companies are included in the report, the data points to be included on a Country-by-Country (CbC) basis are:

  • The activities of the group or entity
  • The number of employees on a full-time basis
  • Total revenue, including intercompany transactions and additional income items in accordance with the OECD guidance on CbC reports
  • Profit before tax
  • Current income tax calculated for the financial year
  • Paid income tax in the financial year
  • Accumulated earnings

The data points can be presented on the same basis as the full CbCR that is filed as part of the transfer pricing documentation, meaning that the numbers do not have to match the financial statements of the group. Information can be left out of the report for a period of five years if they can cause significant harm to the company.

Mandatory publication of some   CbC information naturally raises the question of whether groups should get ahead of the publication of their data by proactively disclosing the data in a more suitable format for their stakeholders by either putting it in a narrative context or including meaningful quantitative information beyond the minimum requirements. 

We have seen an increase in the amount of CbC information that is voluntarily disclosed by the most transparent companies in Denmark during the previous years. This may be partially driven by the upcoming requirements or simply due to the increasing transparency ambitions of the groups. From an initial assessment of the FY2023 disclosures of some of the biggest Danish companies, we have seen a small continuation of the trend towards increasing CbC disclosures with some groups adopting the rules early while there are also examples of publication of full CbCR.

In addition to differences in scope, the approach to disclosures is so far scattered. We see a multitude of approaches to some of the problems presented by pCbCR such as how to handle differences in the basis of preparation between financial statements and CbCR, where and how to present the data (e.g. in a tax report or as part of the annual report) and thereby also whether the data ends up being subject to audit.

So far, the most interesting observation is that there seem to be very few instances of groups providing narrative information about specific countries in their public CbCR data, seemingly letting their narrative descriptions of their management approach and the numbers speak for themselves.

In February, the Australian government published an updated draft law for pCbCR and reopened a consultation period that already closed on 5 March.

Last year, the original draft law made waves around the world, hailed by some as a true game changer as it would have required all multinationals with over A$1 billion of global turnover with a legal presence in Australia to publish a CbC tax report, basically aligned with GRI 207-4. Contrary to the EU’s public CbCR directive, the requirement would have applied for all worldwide activity.

The month of June 2023 passed without the law going for a vote in the Australian parliament, and it was then announced that the law was being postponed by a year (bringing it in line with the EU public CbCR implementation timeline), and that in the face of strong lobbying by businesses and, apparently, the OECD, the Australian government would reopen consultations.

This brings us back last month, and the updated draft law:

  • As announced, this updated law gets rid of some data requirements (that were additional to the GRI 207-4 requirements);
  • As was to be expected, a de minimis threshold has been introduced for foreign companies with a presence in Australia. The law will not apply to companies with less than A$10 million revenue in Australia;
  • And finally the biggest change and surprise, companies will not have to report on all their worldwide activity on a CbC  basis. Instead, the government has put together a list of 41 jurisdictions that need to be reported on in a disaggregated manner, while activities in other jurisdictions can be aggregated in a single “rest of the world” line.







San Marino










Marshall Islands 

Saint Kitts & Nevis


Antigua & Barbuda

British Virgin Islands 



Saint Lucia



Cayman Islands

Hong Kong


Saint Maarten

Turks & Caicos Islands


Cook Islands 

Isle of Man


Saint Vincent & the Grenadines

US Virgin Islands 








Some of these countries are currently on the EU list of non-cooperative jurisdictions (Annex I and II), and Liechtenstein, as an EEA country, is already covered by some countries’ implementation of the EU Public CbCR directive (including Denmark’s implementation law). Nevertheless, and despite the reduced scope of the Australian law for companies already covered by the EU public CbCR directive and also present in Australia, the list of countries that need to be disaggregated has somewhat increased. In particular, we expect that the inclusion of Singapore, Switzerland, and to a certain extent Hong Kong, would impact many EU multinationals.

In the labyrinth of corporate finance, a new term has emerged – tax washing. It is a practice that might not yet have gained the same notoriety as its “cousin”: greenwashing. However, it can be equally misleading in its manipulation of financial data and public perception.

Greenwashing often happens when a company makes an environmental claim about something the organization is doing that is intended to promote an environmental impact which does not exist. The green claim is typically about some form of positive effect on the environment. It can – by example – be seen in companies wanting their employees to choose hybrid vehicles as company cars and thereby looking more sustainable – even though the hybrid is heavier than a normal vehicle and cannot contain power for longer distances and thus must use more fuel. Ergo, it can emit more CO2 than a normal car. 

Just as greenwashing presents a facade of environmental responsibility without substantive action, tax washing obscures the true extent of a company's tax obligations through legal and accounting maneuvers. Overall, the definition of tax washing can be broad, but often it will be used when groups declare Tax Responsibility without making sure that this responsibility can be upheld or fulfilled. 

In other words: you are what you do, not what you say you do!

A good (or bad!) example of this was shown by a large US multinational in France. In December 2019, the French division of the multinational tried to improve its tattered tax reputation by declaring on their website that they in 2018 had a tax contribution in France of EUR 250 million. Later, this declaration was removed because the company considered the amount to be misleading after NGOs and journalists asked how the company came to this particular amount. 

However, the damage had been done. Instead of improving the large US multinational's reputation and appearing more informative and transparent about tax, they became more reviled, and previous cases regarding potential tax evasion came up again.  In these days, where corporations must deal with both the new legislation on pCbCR, Pillar 2, CSRD in connection with the Public’s demand for transparency, things need to happen now, and corporations need to work fast to keep up with both peers and expectations.

Therefore, corporations may declare intentions on specific actions in e.g. a tax policy, which – at the end of the day – will not be fulfilled. This can happen, but it can also be avoided.

It starts with an overview of potential risks. This will bring the corporation in control and give an impression of what should be focused upon within the corporation. Corporations must be able to explain their tax positions and must be able to live up to what is written and declared in a tax strategy. It can be a difficult and resource-demanding thing to make sure that the strategy is followed in practice. If not done, a corporation will not be in control, which can result in journalists, NGOs, investors and others with an interest in the corporation creating doubt about the corporation’s intentions and its tax positions. Also, an opportunity can arise for tax authorities to show weakness in the company's control environment. 

Furthermore, being accused of tax washing erodes public trust in the integrity of a corporation and the reputational damage can be severe and can take years to overcome – if ever. Like it was in the situation with the large US multinational.

Therefore, in times of different sets of rules, trends and stakeholder-wishes to corporations' behavior, it is important to have a suitable control framework to make sure that what is disclosed and declared can stand the task of being both explained and defended.    

The EU Carbon Border Adjustment Mechanism came partly into force as from 1 October 2023, meaning that importers of products within scope of CBAM (iron and steel, aluminium, cement, fertiliser, electricity and hydrogen) had to report their imports for Q4 2023 no later than 31 January 2024. At least, that was the starting point. However, due to technical issues with the CBAM Registry at the EU Commission, importers could request for a 30-day extension, i.e. deadline for submission was extended to 31 March 2024 (a request for extension in the CBAM Registry was auto-approved).

There are, however, importers who still experience technical issues with accessing and/or submitting in the CBAM Registry. These importers should reach out to the national competent authority (in Denmark Energistyrelsen) if a dialogue has not been initiated already.

It should be noted that it is possible to amend the Q3 2023 CBAM report until 31 July 2024.

Technical issues aside, there are some key takeaways to be highlighted based on our experience from the first reporting period which we have summarised below.

  • Who should take lead; CBAM is still somehow a hot potato being a customs and tax issue, but at the same time a data project and a supply chain/procurement challenge. Therefore, various stakeholders are involved. Typically, the customs and tax/VAT teams own the import data management, with sustainability and/or purchasing teams owning the engagement with their suppliers. Hence, a dedicated and multidisciplined team must be pointed out to take lead.
  • Start the reporting process early; as stated above, technical issues hit the CBAM Registry in January, leaving many importers struggling to upload data or even log in with some importers still having to deal with these issues. The CBAM Registry has specific requirements that, if not met, prevent submission and may take considerable time to correct. Therefore, sufficient resources and time should be allocated for report completion and third-party reviews, if relevant.
  • Supplier engagement challenge is significant; for the first three CBAM reports, importers can use default values for the embedded carbon emissions for CBAM products instead of actual emissions data from their suppliers. This means that importers can largely comply by reporting the mass of imported goods along with some other high-level information. However, the default values can only be applied until 31 July 2024. For the Q3 2024 report and onwards, the actual embedded emissions must be reported. Therefore, importers will soon face the scale and complexities of obtaining this data from their suppliers. Hence, importers need to start preparing their suppliers in order to meet these demands well in advance of the October reporting deadline for the Q3 2024 report. Also, alternative suppliers should be sought for if these demands cannot be fulfilled by the current suppliers.
  • CBAM is here to stay – prepare for impact and assess costs and risks; even with some teething problems in the early phases, there is no doubt that CBAM is here to stay. It will be full steam ahead with the next reporting deadlines (30 April, 31 July and 31 October). Importers who do not comply could face penalties of EUR 10-50 per tonne of non-reported emissions. Further, importers should bear in mind that reported emissions will eventually come with a cost, and that the EU plans to expand CBAM to more products before 2030. To prepare for the ensuing financial risk, importers should estimate these costs noting that the carbon cost of CBAM will be linked to the carbon price in the EU Emissions Trading Scheme. Even companies not regulated by CBAM should follow the developments, as any regulated suppliers will be expected to pass significant costs through to their customers.

The first chapter of CBAM with the reporting of Q3 2023 highlights the importance of internal collaboration within the organisation, tech adaptation, data management and supplier engagement. If managed optimally, CBAM could potentially act as a catalyst to do a full product carbon foot printing of all goods bought and sold and thereby in the end act to reduce carbon emissions to gain a competitive advantage.

Lastly, it should be noted that the UK CBAM consultation has just been published. The UK CBAM is expected to come into force from January 2027 and similar to the EU CBAM, it is anticipated to cover certain carbon intensive imports covering aluminium, cement, ceramics, fertilisers, glass, hydrogen and iron and steel. The consultation will remain open until 13 June 2024.

The Expert Group tasked to come up with tax policy proposals on how to achieve a reduction in 70% of emissions by 2030 in Denmark released a report into a CO2 tax in the agricultural sector. If left unmanaged, emissions from the agricultural and forestry sector (barring energy-related emissions) are expected to represent 46% of Danish total emissions by 2030.

The Expert Group presented three models estimated to help Denmark meet its 2030 targets and climate neutrality by 2045.

The models propose taxes ranging from DKK 250 to 750 per ton of CO2. In the cheaper models, a higher financial burden would be taken by the Danish society as a whole, supporting the agricultural sector in its transition. The higher the tax, the higher the direct cost on the agricultural and estimated job losses – but the higher the estimated effectiveness of the tax in reducing emissions.

As a matter of comparison, the carbon price on the EU ETS was at EUR 54/ton at the end of February, but reached EUR 100/ton last year soon after the start of Russia’s war in Ukraine. Furthermore, in advice by the EU Commission to companies on the pricing of carbon, shadow price of carbon is recommended to increase to EUR 250/ton by 2030, and up to EUR 800/ton by 2050 (see vademecum_2127_en.pdf (

The full report (in Danish) can be found here.

  • EU updates the list of non-cooperative tax jurisdictions: Bahamas and Turks & Caicos are removed from Annex I (the “blacklist”); Belize and the Seychelles are moved from Annex I to Annex II (the “greylist”); Albania, Aruba, Botswana, Dominica, Israel, Hong Kong and China were removed from Annex II.
  • Our colleague Flemming Johanssen sounds off on CBAM and offers advice.
  • In Børsen, SMEs sound the alarm on the cost of compliance with CSRD, as they still reel from the cost of GDPR compliance.
  • Council and European Parliament negotiators reached a provisional agreement to establish the first EU-level certification framework for permanent carbon removals, carbon farming and carbon storage in products. The voluntary framework is intended to facilitate and speed up the deployment of high-quality carbon removal and soil emission reduction activities in the EU. The certified units can only be used for the EU’s climate objectives and nationally determined contribution (NDC) and must not contribute to third countries’ NDCs and international compliance schemes.
  • The SBTI has released new guidance that aims to encourage companies to invest in emissions reductions beyond their own value chains on top of decarbonising their own operations. The “Above and Beyond” report provides suggestions to support companies in the design and implementation of BVCM strategies to accelerate progress towards global net-zero. The second report, “Raising the Bar”, explores the incentives for BVCM over which the broader climate ecosystem has influence. It draws upon SBTi research to consider the barriers and incentives for private sector adoption of BVCM.
  • After first rejecting the trilogue compromise text for the EU’s Corporate Sustainability Due Diligence Directive, aka CSDDD aka CS3D, the EU Council eventually passed a watered-down version of the text on 15 March. A key change is the turnover threshold, raised to EUR 450 million from the EUR 300 million in the rejected text, further reducing the number of companies caught by the law from around 6,800 to about 5,300. 
  • The UN’s PRI (Principles for Responsible Investment) published their 2030 EU Policy Roadmap, which includes a section on promoting fair, efficient and sustainable taxation in chapter 4 – Ensure effective corporate governance and reporting.