Global Tax Reform and Transparency Urged
In a global first, a group of institutional asset owners and managers are jointly calling for comprehensive transparency and disclosure to be adopted as core principles in reform of the international taxation system to be put before the G20 Leaders Summit in Brisbane this weekend.
The group including the £150B UK Local Authority Pension Fund Forum (LAPFF), Quebec fund Batirente, Royal London Asset Management (RLAM), Paris based OFI Asset Management & Triodos Investment Management from the Netherlands have issued a statement supporting the initial stage of the OECD BEPS Action Plan and urging a general improvement in corporate governance, transparency and disclosure standards around taxation issues.
APFF Chair, Councillor Kieran Quinn said:
Modernising the international taxation framework cannot be separated from global financial integrity, rebuilding trust and strengthening resilience in international financial structures and investment markets.
As international investors, ensuring sound governance practices are embedded in corporate activities, including taxation planning and associated reporting and disclosure mechanisms is a fundamental concern. Financial secrecy, opaque accounts and aggressive tax practices do not best meet our underlying objectives as inter-generational investors aiming for sustainable value creation.
We urge G20 Leaders to ensure transparency and disclosure, are directly embedded as core principles in relevant tax treaties and national agreements and to work towards a comprehensive multilateral agreement at G20 2015.
In addition, we call on transnational corporations to recognise that many existing financial practices around secrecy and taxation are not sustainable and no longer meet institutional investor governance expectations nor reflect growing civil society views of responsible, transparent corporate behaviour within a licence to operate.
Transparency & Disclosure Fundamental to International Taxation Framework
The current OECD/G20 initiatives to build global economic resilience are vital to increasing stability and integrity in financial markets and mitigating the risk of damage to national economies, retirement savings and the trust of civil society in the operation of global capital, its key institutions, banks and transnational corporations.
It is our view as institutional investors that transparency and disclosure in financial systems assists in early identification of emerging risks that can threaten stability and economic value.
As institutional investors, long term holders of patient capital entrusted by our beneficiaries to manage their savings in their best interests, ensuring sound governance practices are embedded in corporate activities, including taxation planning and associated reporting and disclosure mechanisms is a fundamental concern.
We recognise the need for taxation reform as contained in the G20 Agenda for Growth and Resilience in 2014 which includes the goal of: ‘modernising the international tax system to keep pace with the changing ways people and companies do business.’
It is our view that financial secrecy and aggressive tax practices do not best meet our underlying objectives as inter-generational investors aiming for sustainable value creation. Such practices also hinder the internal efficiency and capability of financial systems to more effectively identify, develop and match productive investment opportunities and long-term value creation strategies with the patient capital contained within retirement funds and national savings pools.
The fifteen proposals in the OECD BEPS Action Plan of 2013 contain the basis for carrying forward much needed reforms to international taxation frameworks. Many of these proposals comprise measures inherent in improving banking, financial and corporate transparency and disclosure at a company, national and global level.
It is our view that taxation reforms that ensure comprehensive transparency and disclosure on a country by country, public basis will best assist us as asset owners to undertake our own investment governance, risk management and due diligence obligations, vital to carrying out our fiduciary duties.
We urge the G20 Leaders at the 2014 Brisbane Summit to endorse the initial Seven Elements of the Action Plan announced by the OECD in September 2014 with the inclusion of comprehensive transparency and disclosure as outlined immediately above.
We urge G20 Leaders to ensure transparency and disclosure, are directly embedded as core principles in relevant tax treaties and national agreements and to work towards a comprehensive multilateral agreement at G20 2015 as recommended by the OECD at Point 15 of the BEPS Action Plan.
In addition, we call on transnational corporations to recognise that many existing financial practices around secrecy and taxation are not sustainable and no longer meet institutional investor governance expectations nor reflect growing civil society views of responsible, transparent corporate behaviour within a licence to operate.
We urge G20 Governments and other parties to work in a cooperative and positive manner on the reform agenda in the wake of the 2014 Brisbane Summit and in subsequent negotiations to implement systemic change that embodies transparency and disclosure in all relevant multilateral, bi-lateral, legislative and regulatory processes and agreements.
James McRitchie, Publisher, CorpGov.net
Take Action: I urge pension funds, sovereign wealth funds, mutual funds and all other institutional investors to join in this effort by contacting Andrew Whiley, Head of Communications at PIRC Ltd/LAPFF. Most US funds have not weighed in on this issue but should, especially public pension funds. Taxes are critical to maintaining public pension funds and to building the intellectual and physical infrastructure for the private sector. CalPERS, CalSTRS, Florida SBA, New York Common, New York City Public Pensions and others should be weighing in on this issue.
International transparency is desperately needed. See Citizens for Tax Justice and the Tax Justice Network. (Listen to Adam Kanzer on a non-binding proposal Domini had at Google.) One US fund that has taken a strong stand is Domini Social Investments. See, for example, Corporate tax strategies threaten wealth creation: Fiduciaries must consider the impact on society by Adam Kanzer, Managing Director and General Counsel. Again, Domini is in the forefront. Let’s hope others follow.
Addendum: In the USA, the Financial Accountability and Corporate Transparency (FACT) Coalition unites civil society representatives from small business, labor, government watchdog, faith-based, human rights, anti-corruption, public-interest, and international development organizations. See their Open letter to the G20: exposing the corporate shell game is good for business – and the world. Join FACT in:
- Eliminating loopholes in our tax system that incentivize corporations to shift profits and jobs offshore, to make sure that the corporations that benefit from all of the resources, protections and markets in the United States pay their fair share of taxes;
- Strengthening, standardizing and enforcing anti-money laundering laws; and,
- Requiring ownership information of all business entities, trusts, foundations and charities – information that indicates who actually controls these entities – be made available to law enforcement and the public.
Follow on Twitter at @FACTCoalition. Donate. See additional organizations & resources.
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