This report serves as an investor tool for engagements on tax, drawing on key trends and gaps observed in the current status of corporate income tax disclosure practices.

The PRI has worked with global investors on corporate tax responsibility since 2015. In response to signatory requests, the PRI convened a group of global investors to explore this issue and produce its Engagement guidance on corporate tax responsibility. The investor guidance sets out the business case for engagement on tax, provides background on red flags (which may indicate excessive tax risk in a company’s operations) and a framework for investor-company dialogue.

In 2017, the PRI and the investors worked together to supplement the guidance with the Investors’ recommendations on corporate income tax disclosure (referred to as “the recommendations” throughout this document). The publication is a set of disclosure recommendations developed by investors to strengthen corporate income tax disclosure across tax policy, governance and risk management areas (see Appendix 1).

While the recommendations are not intended to be prescriptive, companies adhering to the recommendations will provide investors with:

  • an overview of the company’s policy/approach to tax, including how the firm balances the letter of the law with the intent of the law and societal expectations on tax;
  • reassurance that appropriate governance and risk management measures are in place;
  • data and examples to ascertain future financial, legal, operational and reputational risks; and
  • data and examples to determine if a firm’s tax practices reflect its tax policy/framework.

More information is available in the Explanatory notes to the disclosure recommendations.

The recommendations across tax policy, governance and risk management and reporting were compared with corporate tax disclosures in selected sectors in a study commissioned by the PRI (the main findings and trends are highlighted in this report).

The aforementioned publications and the research will inform the PRI collaborative engagement on corporate tax responsibility that is currently underway. The collaborative engagement will facilitate investor dialogue with companies on their approach to tax, governance mechanisms and risk management processes they have in place to implement the tax policy and tax reporting that will support investment decision making. Participants of the collaborative engagement include 35 institutional investors across 11 countries, representing US$2.9 trillion in assets under management. As part of this engagement, investors will engage with portfolio companies to enhance corporate tax transparency in the healthcare and technology sectors.

Evaluating and engaging on corporate tax transparency: An investor guide