Around the world, the corporate sector is increasingly adopting responsible tax practices. Driven by tax transparency reforms and growing calls from investors and tax authorities, this global trend is prompting companies to strengthen their tax governance frameworks.
Under the World Bank Group’s Intermediate Jurisdiction Policy (which governs its approach to tax in private sector operations), IFC’s clients are encouraged to adopt responsible tax practices. To support this, IFC has partnered with The B Team to develop the Enhancing Responsible Tax Practices Program—a first of-its-kind initiative designed to guide a group of IFC clients in adopting and embedding responsible tax practices into their business operations.
What is Responsible Tax?
Responsible tax is best understood as the fiscal counterpart to responsible investment. It reframes tax management not merely as a cost to be minimized, but as a core part of a business’ contribution to society—one that affects investors, governments, communities, and fellow taxpayers.
By taking a more long-term, stakeholder-oriented approach, responsible tax practices help build a more stable and sustainable tax base which enables governments to invest in the infrastructure, institutions, and services that underpin economic growth and attract private capital. In this sense, responsible tax practices are not just good corporate citizenship; they are a strategic investment in the systems that support private enterprise and foster a more resilient and inclusive investment environment.
The B-Team's Responsible Tax Principles
The B Team, in collaboration with leading companies, businesses and civil society leaders, has developed a set of Responsible Tax Principles that provide a comprehensive framework to responsible tax practices. These principles help organizations:
- Elevate tax issues to the board level
- Promote internal awareness and a strong compliance culture
- Encourage transparency and build cooperative relationships with tax authorities, investors, the public, and key stakeholders.
Endorsing the Responsible Tax Principles represents a public commitment, effectively forming a social contract between the company and its stakeholders around transparent and responsible tax behaviors.
Why is Responsible Tax Important to IFC?
Responsible tax practices are integral to IFC’s mandate of promoting sustainable development through private sector growth. In line with the World Bank Group Policy on the Use of Intermediate Jurisdictions in World Bank Group Private Sector Operations, IFC is mandated to promote the adoption of responsible tax principles by its clients. IFC’s approach to tax due diligence also seeks to mitigate the risk of its investments contributing to tax evasion or abusive tax planning. Both of these aspects of IFC’s approach to tax governance acknowledge the importance of tax revenues to domestic resource mobilization.
Boosting corporate income tax revenues is essential for strengthening domestic resource mobilization, particularly in emerging economies that rely heavily on corporate income taxes. Voluntary adoption of responsible tax practices is crucial in this effort and can play an important part in helping to bridge the SDG funding gap.
