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The tax practices of technology companies are keenly in focus from both a global regulatory and corporate responsibility standpoint. To explore these topics, KPMG canvassed the opinions of tech company CEOs and senior executives in two separate global studies.

Technology company CEOs name tax risk as the #3 threat to their organization’s growth over the next three years, higher than even supply chain, talent risk, and climate change. Historically, tax risk represented the straightforward concept that increasing tax rates erode profit margins. Today, tax risk is more nuanced and influenced by factors such as M&A activity, the transition to largely remote workforces, negotiations around global tax reform, evolving regulation on digital products and services, and the possible perception that a company is not paying their “fair share" of taxes.

Stakeholders focused on ESG expect companies to conduct their tax affairs in a sustainable manner, measured in terms of good tax governance and paying a “fair share". They view the public disclosure of a company’s approach to tax, the amount of taxes paid, and where those taxes are paid as important elements of a sustainable tax practice. Technology executives have taken notice. Seventy-six percent report that tax impacts are at least sometimes or almost always considered when developing their ESG initiatives.

Deciding how and where tech companies should establish new operations, employ their people, and record revenue is extremely complex. The ability to navigate this rapidly changing environment is a valued skill, making the tax function a more strategic adviser rather than just a cost center. Half of tech company leaders view the tax organization as this growing strategic adviser.

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For any further information, please contact Alex Holt or Stephen Van den Biggelaar.

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