Protests against racial inequality and police violence in the US were sparked by the murder of George Floyd, an African-American, by a white police officer in Minneapolis, US, on May 25 2020. The protests quickly spread to countries as disparate as Japan, Norway, and Brazil. The demonstrations drew attention once again to the horrific discrimination and violence faced by Black communities and people of colour in the US and around the world.
The movement for justice was also a reminder that racism has infiltrated all corners of society, not just the police - albeit not always with such fatal consequences. In business, and in the tax world, people with non-centralised identities are underrepresented at the highest levels. Discrimination on the grounds of race, gender, sexuality, disability, social class, religion, and other identities is a routine occurrence in our societies and workplaces.
In 2020, though, the ground shifted. The social unrest of the past year provided a solid foundation on which to build a more equitable culture. For tax professionals working for advisory firms and corporations, that means analysing the diversity of their teams and taking action to remedy any shortcomings.
Demonstrations and protests
The events leading up to the Black Lives Matter protests that shook the world in 2020 will be familiar to many. In February, Ahmaud Arbery was fatally shot while jogging in Georgia, US, after being pursued by three white men in vehicles. In March, Louisville police broke down the door of Breonna Taylor’s house on a drug search warrant and fatally shot her. Then, in May, George Floyd was murdered on camera by a white police officer, Derek Chauvin. Chauvin pressed his knee into Floyd’s neck for more than eight minutes during an arrest for allegedly using a counterfeit bill in a grocery store.
The Black Lives Matter movement had been steadily gaining national recognition since its foundation in 2012, but Floyd’s death sparked a resurgence of fury and a determination for justice, and this time the energy radiated across the world. The Washington Post reported in June 2020 that at least 450 protests had taken place globally, but a website dedicated to mapping the protests tallies more than 4,000 demonstrations in locations from Iceland to Uganda.
Chauvin was eventually charged with second-degree murder following sustained public pressure, while the three other officers involved were charged with aiding and abetting murder and manslaughter.
An article from The Economist stated that Floyd’s legacy is “the rich promise of social reform”, and it is true that the global outrage at Floyd’s murder has opened up space for discussions around racial equality. This energy must be harnessed to transform the way businesses approach the issue - and transformation is certainly needed. Of the 170 people who answered ITR’s survey on diversity in the tax sector in 2020, nearly 35% said that discrimination because of race and ethnicity is still a problem.
Diversity in the tax world
The racial justice movement feeds into a wider narrative about recognition and fairness for all underrepresented groups.
Some kinds of diversity have significantly improved in recent years; ITR’s research showed that law firms in countries like China, Singapore and Brazil are approaching a gender balance. However, the scales tip back when the data is narrowed to show the highest-ranking employees: the numbers of male and female partners. In addition, ITR’s research from 2020 showed that 46% of respondents who had been discriminated against at work believed this was on the grounds of gender.
Nevertheless, one head of transfer pricing told ITR in April 2020 that gender diversity had improved faster than ethnic diversity due to “a conscious push to encourage more women at senior grades". The Black Lives Matter protests of 2020 should serve as a reminder to the tax world that the matter of racial and ethnic diversity and fairness in the workplace also requires urgent attention.
Across the US offices of one major law firm that ITR investigated, approximately 36 out of 209, or about 17%, of individuals working across the tax practice were from the black, indigenous, and people of colour (BIPOC) community. The problem intensifies as the level of seniority increases: of the approximately 103 partners at the same firm, only 10 were non-white.
This inequality stands in the way of BIPOC people achieving their career ambitions, and can even lead to people taking themselves out of the race. One senior international tax manager from France and working in Switzerland told ITR that she and some non-white colleagues were forced to switch career trajectories because of the uneven playing field.
“There were three or four black people within the transaction tax group and we were never promoted. Eventually, we left the Big Four because we were never ever getting promoted,” she said.
Crucially, businesses must ensure they avoid paying lip service to diversity while failing to instigate real change. ITR’s 2020 survey revealed that 32% of respondents felt they had been included in something at work so that the company could appear inclusive, rather than for their skills. In 2021, businesses and leaders need to do better.
Hopes and advice for 2021
Racism in tax was a key topic of conversation during ITR’s 2020 women in tax events. Tasneem Kadiri, tax director for UK and Ireland at L'Oréal, and Betty Fualefac, assistant tax director at Expro, spoke on racism in tax at ITR’s Women in Tax Forum, Europe in September 2020. They offered tax leaders some suggestions for improving the diversity balance in their organisations in 2021.
One of the most important points is transparency. Fualefac said that companies should publish statistics on the diversity of their workforce, while Kadiri proposed voluntary reporting on the ethnic pay gap. Fualefac added that governments could help by enforcing these reporting obligations in a similar way to the gender pay gap requirement.
Transparency requirements can also be useful for pressuring company leaders to commit to diversity goals. Fualefac stressed the importance of concrete commitments, pointing out that “most companies are considering policies on how to diversify their workforce in general, with nothing specific from tax leaders”.
“The big question is: would such policies be implemented - and if yes, to what scale?” asked Fualefac.
In terms of practical advice for improving diversity, Kadiri suggested that hiring managers should ensure they are interviewing a diverse pool of candidates. “They should really look to enforce this with their talent acquisition teams and any external recruiters,” she said. Fualefac added that human resources (HR) departments could help to “implement new policies requiring hiring managers or team leaders to build a diverse team whenever there are more than three people in a team or department”.
If change is going to happen, tax leaders need to commit to concrete targets and embrace transparency to hold themselves, and their organisations, accountable. The temptation for leaders may be to shy away from the challenge. However, the racially charged events of 2020 and the responses to ITR’s diversity survey are evidence that, as things stand, change is not coming fast enough.
