Breaking News
Ad-Free Version. Upgrade your experience. Save up to 40% More details

Analysis-Global corporate tax crackdown gets ethical investor boost

Stock MarketsJun 02, 2021 15:31
Saved. See Saved Items.
This article has already been saved in your Saved Items
2/2 © Reuters. FILE PHOTO: A temporary road closure warning sign is seen near the Carbis Bay hotel resort, where an in-person G7 summit of global leaders is due to take place in June, St Ives, Cornwall, southwest Britain May 24, 2021. REUTERS/Toby Melville/File Photo 2/2

By Sujata Rao and Simon Jessop

LONDON (Reuters) - A global tax crackdown on multinationals has the backing of some of the world's biggest investors who say that using low-tax jurisdictions falls foul of the tenets they have committed to.

After years of negotiations over complex arrangements deployed by big companies, G7 finance ministers meeting in Britain on Friday are expected to declare their support for a global accord to address billions of dollars in lost tax revenue. [L2N2NI198]

This push is backed by some large investors, often state-run, who are scrutinising tax bills as well as profits.

"It's not about paying more tax, it's about paying the right amount of tax. We want companies to not engage in practices through transactions and legal structures which contribute to tax evasion," Kiran Aziz, sustainability analyst at Norway's KLP which manages $80 billion in pension assets, said.

Research by the charity ActionAid International estimates that taxing Amazon (NASDAQ:AMZN), Apple (NASDAQ:AAPL), Facebook (NASDAQ:FB), Alphabet (NASDAQ:GOOGL) and Microsoft (NASDAQ:MSFT) "fairly" on their 2020 profits could potentially generate $32 billion for G20 countries, while a 2018 academic study found global state coffers lose out on $200 billion a year.

The G7 goal is to set rules on taxing cross-border digital activities as well as a minimum tax rate above the level paid if companies channel profits via a low-tax country such as Ireland with its 12.5% corporate levy.

The United States has mooted a 15% rate, down from its original proposal of 21%. [L1N2M71D3] [L8N2MM7I6]

Norway's $1.3 trillion sovereign wealth fund, which has set the pace on many environmental, social and corporate governance (ESG) issues, recently fired a public salvo over what its CEO said was "aggressive tax planning" and lack of transparency on tax by selling stakes in seven companies, which it did not name.

Many funds interviewed by Reuters said they are escalating talks with companies and, if necessary, will dump shares.

KLP has quizzed around 100 companies, including Silicon Valley giants, joining hands with other Nordic investors.

"We believe taxes should be paid where actual economic value is generated," Aziz said of so-called "profit-shifting" whereby companies book income from sources like royalties, software or patents, not where it was earned but where tax rates are lower.

While KLP for now sees engagement as more effective than dropping investments outright, some have already gone that far.

Peter Rutter, head of equities at the 150 billion pound ($213 billion) Royal London Asset Management said he had sold or skipped buying shares in some companies on the basis of tax arrangements - often at the behest of his pension clients.

"Corporates doing the right thing by way of taxation is a question we are increasingly getting," Rutter said.

(Graphic: Corporate tax rates in select countries -


Tax has typically played second-fiddle to issues such as climate, pollution and labour rights for investors, while most ESG ratings providers do not assess a company's tax planning while calculating scores.

Many asset managers enjoy lower tax rates by domiciling funds in countries such as Ireland and Luxembourg.

However, MSCI included tax transparency last November and ESG ratings can be affected if for example tax bills differ significantly from what a company would have paid in its country of operation, its managing director Laura Nishikawa said.

"We are not saying 'divest now' but (urging clients) to be an informed investor. You need to know the risk and that's a fiduciary duty too," she added.

Many investors are preparing to investigate tax policies more thoroughly, regardless of when rules are tightened.

Dutch asset manager APG is hiring staff and planning to buy specialist data after its main client, pension fund ABP, established a tax and investment policy, senior corporate governance specialist Alex Williams (NYSE:WMB) said.

Like KLP, APG has been grilling companies about their tax policies, Williams said. The fund, which manages almost 600 billion euros, recently managed to dissuade the new management of one investee firm from using tax havens.

(Graphic: Then and now: corporate tax intake as % of GDP -


Investor pressure over tax has largely emanated from Europe, particularly ESG-focused Scandinavia, with an apparent cultural difference among shareholders based in the United States.

U.S. retirement funds CalPERS, CalSTRS and Texas TRS all declined to comment, but an official at one large U.S. asset manager said tax is "not an investor issue" and should "be led by those who ultimately impose the taxes".

Tech companies have long defended their tax practices. Google, whose European headquarters is in the Irish capital Dublin, says it pays taxes where it is required to do so by law.

Sudhir Roc-Sennet, U.S.-based head of ESG at Vontobel Asset Management, while backing moves to close tax-rate gaps, argues against demonising companies for legally using loopholes.

"It does not make sense for pensioners of the future to reduce their savings pot by asking companies to pay more tax," Roc-Sennet said.

"Should corporates pay a higher tax rate just because it's ethical? I don't think so. As investors, we think companies should operate to the best interest of their shareholders as long as they stay within the legal framework," he added

While that view remains widespread, accountants KPMG and BDO have warned clients of the risk to reputations and returns should tax rules be tightened.

One thing investors do agree on is that only coordinated action will stop companies using lower tax jurisdictions.

"In the absence of regulation it will be difficult to get companies to move. Turkeys are not going to vote for Christmas," Fred Kooij, chief investment officer at Tribe Capital, a boutique impact investment firm, said.

($1 = 0.7043 pounds)

Analysis-Global corporate tax crackdown gets ethical investor boost

Related Articles

O’Reilly Automotive Earnings, Revenue beat in Q2
O’Reilly Automotive Earnings, Revenue beat in Q2 By - Jul 28, 2021 - O’Reilly Automotive reported on Wednesday second quarter earnings that beat analysts' forecasts and revenue that topped expectations. O’Reilly...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email