Tax Disclosure as a Key Element of Sustainability Reporting: A Critical Review of GRI 207 Standard

Abstract

To combat tax avoidance and enhance corporate accountability, several global initiatives and frameworks have been established. OECD BEPS (Base Erosion and Profit Shifting) Action 13 requires as mandatory Country-by-Country Reporting (CbCR) for large MNCs, ensuring disclosure of taxes paid per jurisdiction. The EU Public CbCR Directive (2021/2101) requires companies operating in the EU to publicly disclose tax payments in each member state, while CSRD (Corporate Sustainability Reporting Directive) includes tax as part of broader ESG disclosures. There are also examples of national tax disclosure requirements (in the USA and UK), and sector-specific reporting requirements (Extractive Industry Transparency Initiative – EITI or UN Principles for Responsible Investment).

GRI 207: Tax 2019 is the first comprehensive voluntary tax transparency standard applied across all industries, that combined elements from above mentioned reporting frameworks. The privately organized Global Reporting Initiative (GRI) has created an approach with the GRI 207 standard that declares tax aspects to be relevant to sustainability. GRI 207 was introduced in December 2019 and became effective on January 1, 2021, as the first standalone tax transparency standard within the GRI framework.

The GRI 207: Tax 2019 Standard is designed to improve corporate tax transparency and accountability. It requires disclosures about tax governance, control frameworks, about how tax strategy aligns with business and sustainability goals (GRI 207-1 and 207-2), and how companies engage with stakeholders regarding tax matters (207-3). Moreover, multinational companies are required to provide tax-related data per jurisdiction, including revenues, profits, taxes paid, and employee numbers (GRI 207-4). Despite positive aspects related to GRI 207 application (alignment with ESG principles or Country-by-Country reporting), it also suffers from weakness and limitations, such as its voluntary nature, enforcement challenges and comparability.