By Fiona Reynolds (@Fireynolds), CEO, PRI


No one wants to talk about tax or, more importantly, take the actions required to tackle the elephant in the room. Tax avoidance is one of the biggest drivers of inequality across the globe. No one can begin to truly tackle this issue without talking about tax.

As it currently stands, there simply aren’t enough corporations disclosing their practices, investors asking the right questions, or governments imposing regulations and penalties. Whether through legal avoidance loopholes or illegal evasion practices, multinational corporations not paying their fair share of taxes is far from victimless. 

Corporate tax avoidance practices cost global governments between $100 billion and $600 billion every year. Developing countries suffer disproportionately. They lose around $213 billion from tax avoidance annually, according to the International Monetary Fund.

It’s not just the figures that are staggering, but also the lack of social progress to which this deficit in tax revenues directly contributes. Simply put, tax revenues are a driver of equality; they allow governments to provide critical social services, which not only contribute to economic growth but also protect a community’s most vulnerable.

Corporate taxation that is effective and fit for purpose can drive sustainable development, mitigate rising inequalities, and support both inclusive growth and prosperity. Tax revenue provides global governments with the financing for much-needed public services as well as social and environmental programs to address urgent challenges.

This is why it’s time to start talking about tax—and it’s the global investment community that has the power to bring corporations to account.

Over the past three years, the Principles for Responsible Investment has coordinated a collaborative engagement programme between a group of investors together representing $2.9 trillion in assets under management, and 41 multinational corporations in the health care and technology sectors. The result of this engagement underscores the glaring lack of tax transparency that global media has recently brought to the fore.

The engagement did highlight examples of good practice and led to some progress in the publication of global tax policies and reporting on governance and risk management. However shockingly, it also revealed that not one single target corporation produced public country-by-country reporting.

CbCR is a vital part of tax transparency; detailing revenues earned and taxes paid in each jurisdiction allows investors to make a considered assessment of how a company is positioned on tax.   

What’s more, nearly 20 percent of the target companies in the engagement were unresponsive, including: Align Technology, Alphabet,, Cisco Systems, Danaher Corporation, Facebook, Sage Group, and Intuitive Surgical.

These companies didn’t even come to the table to engage with investors on their tax practices. This raises the question—why? Without their engagement, outsiders can’t say for sure whether or not they’re concealing aggressive tax practices, but their silence certainly shines a light on the opacity of their practices.   

This is where the global institutional investment community needs to carry the baton forward. For investors, tax is a material issue. It poses underlying investment risks as well as risks to wider portfolio returns.

Institutional investors in their role as shareholders have the means to steer companies to focus on genuine economic activity. They must adopt a long-term perspective, systematically consider tax practices within their investment decisions, and pursue ongoing engagement with corporates, policymakers, and other stakeholders. To make a substantial impact, investors need to demand more accurate, timely and meaningful corporate reporting, including public CbCR, so they can better assess tax risks and opportunities and identify leading practices in their portfolio.

Until investors stand up and start to hold multinational corporations to account, regular citizens will continue to see the Starbucks and Googles of the world avoiding paying taxes in the jurisdictions where they operate and have earnings. There will continue to be a lack of funding for healthcare, pay cuts for public servants, reductions in the police force and real wages going backwards, all while CEOs carry on being rewarded.

Tax is ultimately a sustainability issue. Investors, businesses, and governments constantly talk about the fact that we need to tackle inequality. But ask them to work on tax and many run a mile.

If the world is to become a more equal place, investors holding corporations to account on tax is a critical place to start.



This article was first published in Barron’s