The Principles for Responsible Investment (PRI) has today launched new guidance for investors—Evaluating and engaging on corporate tax transparency: An investor guide—to assist them with engaging the companies in their portfolios on greater tax disclosure.
Recent headlines over alleged tax liabilities at a number of multinationals, accompanied by concerns over potential legal, operational, reputational, financial and/or governance risks, means that investors now want reassurance that the tax practices of their portfolio companies can withstand stakeholder scrutiny and potential regulatory changes.
The new guide 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. It will enable investors to:
- identify areas for further evaluation when assessing corporate data on tax; and
- structure their engagement questions based on observed trends in reporting.
The PRI has worked with global investors on corporate tax responsibility since 2015, producing a seminal work: Engagement guidance on corporate tax responsibility, setting out the business case for engagement on tax, identifying tax risks and providing a framework for investor-company dialogue.
In 2017, the PRI and these investors worked together to supplement this document with the Investors’ recommendations on corporate income tax disclosure, a set of disclosure recommendations developed by investors to strengthen corporate income tax disclosure across tax policy, governance and risk management areas.
“There is growing interest among responsible investors to understand how companies in their portfolios approach tax-related issues,” said Kris Douma, director of investment practices and engagements, the PRI. “As multinational companies continue to face increased scrutiny in relation to their tax practices, investors are calling for greater transparency to evaluate companies’ exposure to potential earnings, governance, reputational and broader societal and macroeconomic risks.”
The full report in PDF format can be found here.