How can Tax increase trust and unlock long-term value?

When I was a kid, I used to do “pinky promises” with my siblings. That was the foundation for trust between family and friends back in the day. Even though you can’t use a pinky promise or a handshake as a foundation of trust in today’s working world to seal a corporate contract – trust is still the foundation of better working relationships and is the bedrock on which value is created.

But all you have to do is look at the headlines – whether in traditional and mainstream media or in social media and memes – to see that trust is under strain, throughout the world.

There are not only concerns about public- and private-sector corruption, fears that personal data and fake news may be used as weapons, but we see rising income inequality, inflammatory rhetoric by political leaders, and growing suspicion that the “elites” get away with things at the expense of the masses. These are all contributing factors to an underlying lack of trust, which is becoming a focal point for global businesses, EY included.

A lack of trust has the potential to seriously disrupt long-term value for businesses by hurting entrepreneurship and denting consumer confidence, both of which have a big impact on the health of the economy. Businesses can and must do more to foster the kind of economic growth that benefits everyone, not just the few. This means more than just doing business “responsibly.” It means applying the knowledge, skills and experience we use every day to help address society’s toughest challenges.

So, how can this be done? A lot of research is being conducted to help businesses understand how to create trust. For example, EY has been a sponsor and a participant in a landmark project called the Embankment Project on Inclusive Capitalism which has identified five criteria for measuring trust:

1.    Fulfillment of a business’s stated commitment or purpose

2.    Benevolence of intention in the marketplace

3.    Knowledge and skill

4.    Truthfulness

5.    Sincerity

And what role can tax play? Today, more than ever, trust is central to the tax profession and our roles in it. I don’t just mean gaining a company’s trust to get their numbers right. I’m talking about the social contract based on trust that is at the foundation of successful tax systems and governments.

A recent survey from the Association of Chartered Certified Accountants studied people’s views on whom they trust when it comes to international taxation across G20 nations. Fifty-seven percent say they trust professional accountants, compared with 49% who trust tax lawyers and 35% who trust NGOs. Politicians brought up the rear, with two-thirds of those surveyed saying they distrust or highly distrust elected officials. 

What this says to me is that tax professionals have an opportunity – you could even say a responsibility – to help inform people, because they trust us.

In many cases, how a business handles tax says a lot about how it operates in other ways. To help organizations succeed in today’s uncertain marketplace, tax leaders needed to wear more than one hat.

?    They’ve needed to be a tax ambassador, providing trusted business advice to their organizations that equips leaders to make educated decisions and capture value.

?    They’ve needed to be a tax technologist, embracing the power of technology to do the job more efficiently and redefine their roles to be fit for the future.

?    Most recently, they’ve needed to be a tax diplomat, helping their company, colleagues and stakeholders connect the dots between data sources, business decisions and their tax implications, while fostering relationships throughout the rest of the organization.

And now it’s time to be a trust builder. Notice that I didn’t use the word tax this time, because our remit – the scope of where we can and should influence – goes well beyond the tax function in this transformative age.

Seth Godin, an American author who is also one of the most influential minds behind business leadership, said; “Earn trust, earn trust, earn trust – then you can worry about the rest!” And the Tax function is especially well-positioned to help companies do that very thing.

It’s a short hop from tax connector to trust builder. Restoring and strengthening trust within organizations will in turn strengthen trust with authorities and the public… which should go a long way toward improving trust in institutions. And that’s “value-add” in the highest order.