Benjamin Franklin, former US president, once observed, “In this world, nothing is certain except death and taxes.” Two and a half centuries later, tax has become more than a legal obligation. It is now a defining test of how companies are governed.
Tax transparency, compliance, and dispute management increasingly shape corporate reputation, investor confidence, and long-term sustainability.
This matters well beyond the boardroom. Pension savings are invested in listed companies whose share values can collapse under tax scandals. Government revenue lost to poor corporate tax practices is revenue not spent on roads, hospitals, or schools. Tax governance, in other words, is everyone’s concern.
For decades, tax sat quietly in the finance department. That era is over. Tax decisions now shape reputation, share price, and regulatory relationships. When a company is accused of aggressive tax planning, it is no longer just a compliance matter, it is a front-page story.
The G20/OECD Principles of Corporate Governance (2023) and Kenya’s Capital Markets Authority Code (2015) both emphasise accountability, transparency, and disclosure as non-negotiable.
Increasingly, these frameworks recognise that tax strategy is inseparable from the broader governance mandate. Boards that fail to exercise oversight of tax affairs expose their organisations to risks that no audit committee can retrospectively contain.
Tax transparency means openly disclosing where a company operates, how much tax it pays, and why. Tax compliance means filing accurately and paying on time. Together, they signal ethical leadership.
The World Bank’s 2020 Corporate Governance Brief notes that well-governed companies carry lower risks and enjoy cheaper access to finance. The IFC’s Toolkit for Disclosure and Transparency goes further, urging companies to fold tax transparency into their ESG reporting.
In a market where investors increasingly screen for tax conduct, opacity is costly. Companies that voluntarily disclose their tax strategies are rewarded with greater investor confidence and fewer adversarial encounters with revenue authorities.
For directors, tax is no longer a matter they can safely delegate and forget. It has become one of the clearest tests of board effectiveness and one of the sharpest sources of personal and institutional risk.
Under Kenya’s Tax Procedures Act and Companies Act, directors can be held personally responsible for tax offences committed by the companies they lead. A board that fails to ask the right questions is a board exposed.
At the same time, global investors, lenders, and rating agencies increasingly factor tax conduct into their decisions. Boards without a credible tax narrative risk a higher cost of capital or exclusion from investor pools altogether.
Strategy and tax are also inseparable. Decisions on mergers, expansion, transfer pricing, and digital business models all carry tax consequences that can make or break value creation. A board that does not understand the tax implications of its strategy is not fully in control of the strategy itself.
Weak governance exposes companies to the risk of tax disputes, which often stem from disagreements with revenue authorities over how tax laws apply to complex business models.
A dispute does not necessarily indicate non-compliance. It may reflect a company’s justified challenge to a misapplication of the law or a misunderstanding of its business operations.
Yet even justified disputes expose governance gaps where the company lacks proper documentation, internal protocols, or board-level awareness of the matters in contention.
Companies with strong governance frameworks such as proper record-keeping, proactive regulator engagement, and internal capacity are better positioned to navigate these processes, reduce disruption, and increase the likelihood of favourable outcomes.
Regardless of the outcome, the resolution of a tax dispute helps establish precedent and guides future compliance. In the long run, this contributes to stronger governance and better organisation of tax affairs. Boards should treat tax with the same strategic seriousness they apply to capital allocation or risk management.
Tax must become a standing agenda item at board and audit committee meetings, not a matter raised only when a dispute has already escalated. Directors who receive regular briefings on tax risk exposure, pending disputes, and shifts in the regulatory landscape are far better equipped to exercise meaningful oversight.
Equally important is the recognition that tax cannot operate in isolation. Tax decisions sit at the intersection of finance, legal, compliance, and business strategy. When tax is embedded in the organization’s decision-making architecture rather than siloed within a single department, the quality of governance improves markedly.
Finally, boards should treat tax transparency as a trust‑building tool rather than a burden. They are building trust with the stakeholders whose confidence underpins long-term value.
Voluntary disclosure of tax strategies signals to investors, regulators, and the public alike that the company is governed with integrity, and that signal carries real economic weight in a market increasingly shaped by ESG considerations.
Tax is no longer a back-office function. It is a boardroom responsibility that signals a company’s character to the market. Companies that elevate tax governance are better placed to attract capital, withstand scrutiny, and grow sustainably.
Franklin was right that taxes are certain. What is no longer certain is whether companies that fail to take them seriously will survive the scrutiny that now comes with them.
The writers are tax and legal consultants at Pwc Kenya.
