Investors' Big Tax Transparency Experiment
Tax Notes contributing editor Nana Ama Sarfo examines whether the results of recent tax transparency shareholder proposals at Amazon, Cisco, and Microsoft suggest a baseline level of support for…

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An old question was resurrected during the proxy season 2022: Are investors open to corporate tax transparency proposals? To what extent? This question was tested on proxy ballots from Microsoft MSFT, Cisco, Amazon AMZN and Cisco. The results indicated that tech shareholders are becoming more open to transparency, even though they still have not fully accepted it. As the proxy season winds down, investors are asking whether other industries and sectors might also be interested in tax transparency. Investors at Microsoft, Cisco, and Amazon voted for proposals to encourage tech giants like Microsoft, Cisco, and Amazon to publicly disclose their country-by-country tax information, in accordance with the Global Reporting Initiative's GRI 207 (GRI 207) tax standard. Companies that report under the GRI 207 standard publish a variety of disclosures about their tax structures and strategies, including CbC tax data, approaches and tax risk management and engagements with stakeholders. Although none of the three proposals were approved, they all received support from more than 20 percent of voting shareholders. Although twenty percent might not seem significant, it is a lot when compared to voting trends on other issues such as greenhouse gas emissions. It is however high for tax transparency proposals. These have been historically blocked from voting or even defeated by 99 per cent of shareholders.
The investors moved in a coordinated manner this time, with the support of Pensions & Investment Research Consultants Ltd. and the Centre for International Corporate Tax Accountability and Research, which coordinated the proposals from all three companies. Amazon was the first to vote on public CbC reporting. 21 percent of voting shareholders supported the GRI proposal. The results were difficult to interpret. Was the figure unusually high or the beginning of something new? The results of Cisco and Microsoft, which showed that 27% and 23% respectively approved the GRI proposal, show that Amazon's vote was not an anomaly. Microsoft, for example, submitted six shareholder proposals in this year's election. The tax transparency proposal received the most approval votes. Although it is still too early to say, the results from Amazon, Cisco, Microsoft suggest that there may be a base level of support for transparency. According to reports, institutional investors were split in the case of Microsoft or Cisco.
Norges Bank Investment Management, the CA Public Employees Retirement System, the Dutch pension fund PGGM and the Office of the New York City Comptroller all supported both proposals. Responsible Investor reports that APG Asset Management only supported the proposal at Cisco and that the California State Teachers Retirement System was opposed to both.
The tech companies also reacted strongly to these proposals. The opposition statements were issued by all three companies, arguing that their tax data is sufficient. They also warned that more detailed disclosures could harm their businesses and present an incomplete tax picture.
In its opposition statement, Microsoft stated that detailed disclosures required under the Tax Standard could have unintended consequences, including the release proprietary competitive information about our operations and cost structures. We believe that the Tax Standard's focus on corporate income taxation is too narrow. It also simplifies a complicated system of fiscal policy decisions each country makes regarding revenue sources. This includes individual taxes and consumption taxes. 'Mountain View (CA, USA) - September 4, 2016, Microsoft Silicon Valley Center. Microsoft SVC, the... [+] giant in software, is California's Silicon Valley.getty
It will be crucial to observe how these proposals are received in different industries moving forward. Tax Notes was informed by PIRC that it and CICTAR will continue discussions on GRI 207.
"We have consulted with governments, and shared our experiences, in order to bring about a globally standardized fiscal framework, with transparency that shareholders need,' Tom Powdrill (PIRC's chief of stewardship) said in the statement.
Investors targeted tech companies in 2022. However, extractive companies seem to be the next target in 2023. Oxfam revealed in November that it had filed shareholder resolutions asking ExxonMobil XOM & Chevron CVX - and ConocoPhillips COP - to file tax transparency reporting in accordance with GRI 207. These resolutions were submitted in advance of the companies' May 2023 annual general meetings.
The healthcare sector is another area of potential interest. U.N. Principles for Responsible Investment had previously engaged healthcare companies in public CbC reporting. They found them more responsive than tech firms, but less willing to adopt public reporting.