By David Atkin, CEO, Principles for Responsible Investment


Australia could become a world-leader in tax transparency. It would be the first jurisdiction to require large multinationals with operations in Australia to disclose the taxes they pay, as well as information like revenue, profits before tax and employee numbers per country.

The PRI, alongside a number of leading investors, has been calling for country-by-country reporting (CBCR) since 2016 and we strongly support this move. CBCR is urgently needed to help investors understand whether large multinationals are paying taxes where their activity is located, or if there are risks of profit-shifting. Without transparency, investors are in the dark as to whether their investees are exposed to earnings, governance, or reputational risks associated with tax avoidance.

As some companies still choose not to disclose information or discuss their tax contributions with investors, Australia’s draft legislation, if implemented, would be a game-changer. The move would also provide investors with the impetus they need to push for tax transparency more widely, in other jurisdictions and portfolio companies not affected by the Australian legislation.

Tax fairness and transparency are gaining momentum

In 2021, a total of 138 countries reached a landmark OECD-led agreement to introduce a global minimum tax for multinational enterprises – a move that would have been hard to imagine a few years ago. Furthermore, amid rising inflation, governments across the world are looking at ways to raise revenues. Greater enforcement of existing tax regulations will be an appealing option; as a result, companies are expecting more tax disputes in 2023 due to heightened scrutiny from tax authorities.

More transparency is coming too. Large multinationals will be required from 2025 to disclose CBCR for their EU operations and for a small number of non-cooperating jurisdictions. Investors should push those companies to go beyond legal compliance and disclose CBCR for all countries of operation, similar to what Australia is proposing. Large multinationals already collect and disclose CBCR to tax authorities; companies simply have to make it public.

Looking beyond the numbers

Reluctant companies often claim that investors are only interested in the numbers, and may misinterpret CBCR disclosures. Yet investors have also been encouraging companies to disclose qualitative information to contextualise their CBCR disclosures. Greater tax transparency will lead to a better understanding and dialogue between companies and their stakeholders, and ultimately to more responsible practices.

A growing number of leading companies like Newmont and Vodafone are seizing the opportunity to control the narrative on their tax affairs by voluntarily disclosing CBCR. These companies – although still a small number of them – understand that more tax-related transparency puts them in a much better position.

Tax blind spots could throw RI movement into question

Tax avoidance runs counter to many, if not all, of investors’ responsible investment objectives. For investors concerned about the Sustainable Development Goals, which include human rights, tax should be a priority as tax avoidance deprives governments of much-needed resources to achieve them.

However, not all investors are aware that high-profile, mainstream regulations or guidelines refer to tax. For instance, the EU Sustainable Finance Disclosure Regulation (SFDR) requires products classified as Article 8 or 9 to not invest in companies that lack good governance practices, including tax compliance. Similarly, the OECD guidelines state that multinationals should comply with the letter and spirit of tax laws, meaning that multinationals should not exploit loopholes or technicalities to artificially reduce their tax liabilities.

Investors and beneficiaries are increasingly seeking portfolio companies that include sustainability and responsibility at the heart of their business, and a willingness to discuss their tax strategy and disclose relevant information should be a big part of a company’s sustainability credentials.

Investors need to be active players

Investors can expect to face pushback, or a lack of response, from some corporates. In those situations, companies need to hear from as much of their investor base as possible, and as frequently as possible, to ensure that tax is a priority. Companies won’t prioritise tax if their investors don’t.

Last year, we saw the first three shareholder proposals on tax transparency at US companies Amazon, Cisco and Microsoft reaching the significant 20% vote threshold. Last year was not an outlier: we have seen more shareholder proposals on tax transparency (5) filed in the 2023 proxy season, at companies like Chevron or ExxonMobil. Shareholder proposals demonstrate how investors can leverage the growing momentum on tax to communicate their expectations and ensure their investees are evolving with the changing landscape.

The more investors include tax-related expectations in their voting policies and stewardship activity, the more companies will respond and evolve according to investors’ expectations. Without sustained investor pressure, the considerable efforts of civil society, forward-thinking businesses, and policy makers like the Australian Treasury may be undermined. Investors do not need to be tax experts to ask for CBCR – just like they don’t need to be climate experts to ask for emissions data – and companies should be able (and expected) to explain and defend their tax practices.

The move towards tax transparency in Australia is promising for investors and sends a clear signal for other jurisdictions to follow suit. Corporate lobbying should not dilute the ambition of the proposal.

Our extensive guidance should also help investors get up to speed quickly. Investors interested in exploring the issue and contributing to our work can join the PRI tax reference group.

The PRI blog aims to contribute to the debate around topical responsible investment issues. It is written by PRI staff members and occasionally guest contributors. Blog authors write in their individual capacity – posts do not necessarily represent a PRI view.