So taxation is a risk
Everybody has to pay taxes so taxation is business as usual, but some companies consider taxation a risk with statements like this: They “ worry about potentially negative consequences from changes in or interpretations of tax laws and how they might affect the results of operations, cash flows and financial condition.”
But Johnson & Johnson go much further than others. One has to wait until the last sentence of their tax risk section to become worried:
“However, any tax authority could take a position on tax treatment that is contrary to the Company’s expectations, which could result in tax liabilities in excess of reserves.” [1]
Perhaps there is a problem in their tax department. Perhaps there are ongoing tax audits which are going against expectations. Something seems to be happening but we are not sure what. Otherwise why would they include this risk? But the key to this issue may come from the following statement:
“The Company conducts business and files tax returns in numerous countries and is addressing tax audits and disputes with many tax authorities.” [1]
Could it be that the others do not have tax audits and disputes with many tax authorities? Or perhaps with fewer disputes they have a reduced risk? But how many disputes and tax audits does a company need before the risk should be included in their annual report? Or perhaps it is the amount of a dispute which is a risk? But this is not indicated. Perhaps the others have efficient tax departments. The very mention of this risk creates more questions than it gives answers.
The danger of taxation policies is that some companies think too far out of the box and get themselves in trouble, here Johnson & Johnson are thinking ‘out of the tax’!
[1] Johnson & Johnson, Form 10K Annual Report, for the fiscal year ended 2nd January 2022.