For Tax Executives, More Disclosure on Global Liabilities Means More Headaches

Among them are worries about the costs, particularly those associated with collecting the details needed to make the disclosures, corporate tax executives said last week at the Tax Council Policy Institute’s conference in Washington, D.C. There also are concerns about how investors, regulators and others will digest the information.

“There are a lot of people out there saying what should happen, and we’re trying to coordinate all of it because any time you put information out publicly, you need to make sure it ties to your financial statements and you can support the numbers," said Mark Volpe, senior vice president of tax at biotechnology company Regeneron Pharmaceuticals. “We’re just trying to really understand it so we don’t…make a mistake."

A number of jurisdictions around the world are weighing mandates for more granular reporting on companies’ tax liabilities to shed light on the taxes companies are paying in the countries in which they operate.

The Financial Accounting Standards Board in March issued a proposal aimed at providing transparency about the taxes companies pay. The U.S. accounting standard-setter, which has for years weighed plans requiring more tax disclosures from U.S. companies, set a deadline for the end of this month for comments on the proposal.

Meanwhile, the European Union in 2021 approved public country-by-country reporting in an aim to shed light on the taxes companies are paying in the countries where they operate. For most global companies, that mandate is likely to go into effect for the 2025 reporting period.

And the Australian government last month released draft legislation that will require certain large companies to publicly disclose country-by-country reports as well as other new tax and financial information by jurisdiction. The law, if enacted, is expected to create new reporting requirements for a number of large U.S. companies and is anticipated to go into effect for tax years beginning this summer.

The Organization for Economic Cooperation and Development launched country-by-country reporting years ago, but the information was meant for tax authorities. Shortly thereafter, though, some groups began pushing for that information to be publicly disclosed, said Regeneron’s Volpe. “This is clearly a topic that’s been coming. And we’re there," he said. “I think over the next couple of years, more information is going to be publicly disclosed."

Shareholders are asking companies to share tax details largely in line with a tax standard from the Global Reporting Initiative—the creator of widely adopted environmental, social and corporate governance standards—which requires companies to make public disclosures on their business activities, revenue, profit and tax paid in each country where they operate. American companies don’t typically publicly disclose those details on a country-by-country basis outside of the U.S.

Shareholders at companies including Exxon Mobil, Chevron and Amazon.com will vote this month on proposals to provide more public tax disclosures than are currently required for U.S. companies. ConocoPhillips stockholders largely voted against a similar proposal Tuesday. The push this year follows similar investor proposals in 2022 at Amazon, Microsoft and Cisco Systems, each of which received around 20% support. The votes, though nonbinding, are an important gauge of what investors are focused on.

The companies either declined to comment or pointed to their board recommendations on the proposals in response to requests for comment. In suggesting that investors vote against the proposals, the companies’ boards say generally that they are already providing substantial tax disclosures and so believe the requested reports are unnecessary.

Investors want to make sure that companies they are invested in are behaving responsibly and to properly assess the risks of potential tax legislation in markets where a company operates, Tadd Fowler, senior vice president, treasurer and head of global tax operations at Procter & Gamble, said at the tax conference last week. But there are challenges associated with these disclosures, he said.

About seven years ago the maker of Gillette razors and Tide detergent published a “pretty brief" report on the company’s approach to tax, according to Fowler. That report is now more than 40 pages long and includes, after “quite a bit of investment," the Cincinnati-based consumer-products giant’s total tax contribution, meaning taxes collected and borne, he said. That figure, roughly $10.5 billion for fiscal year 2022, is also broken down by the type of tax and certain geographies.

Coming up with total tax contribution alone is an arduous task, Intel Chief Tax Officer Sharon Heck said at the event last week. The chip maker provided the figure for internal use only, which took 16 different systems and upwards of a couple of months, she said. “It is not the push of a button at all."

P&G’s report doesn’t list the country-by-country numbers, Fowler acknowledged at the event, pointing to some of the complexities related to sharing detailed tax information. “The challenge, I think, with country-by-country reporting is when it doesn’t tell the whole story in terms of what is the company’s economic contribution in a particular market," he said. “The company doesn’t run on a country-by-country basis. We run global categories, we run large regions."

Additionally, Fowler said, disclosing certain information may include competitively sensitive details, such as the number of employees in a market or profits and sales in a particular area. “Those are the challenges that are keeping companies from proactively getting out there before they have to, realizing we’re all eventually going to."

Write to Jennifer Williams-Alvarez at jennifer.williams-alvarez@wsj.com