Tax havens and offshore companies: Etica Funds is one of the co-signatories of an engagement initiative targeting the US Congress to support the Disclosure of Tax Havens and Offshoring Act.
The law was unveiled during a meeting of the US House Committee on Financial Services and aims to propose CbCR for listed companies.
The letter signed by Etica Funds
The letter, signed by nearly 60 investment companies managing combined assets of more than $800 billion, was addressed to Maxine Waters, Chair of the US House Committee on Financial Services, and Patrick McHenry, a Committee member.
The letter urges the Committee to seriously consider the tax transparency of businesses operating in multiple markets in order to make it easier to properly assess and manage the investment risks of mutual funds and the risks to the wider economy.
Why this commitment?
Large companies that adopt strategies with little transparency on tax data tend to minimise their obligations, gain hidden competitive advantages and even generate artificial profits through tax refunds and other benefits.
Analysis shows that when governments take action against these aggressive tax practices, the financial consequences for the companies concerned can be very serious.
Without adequate transparency on tax information, investors may therefore not have sufficient information to properly assess the level of tax risk of the companies in which their funds invest.
Poor tax transparency opens the door to significant risk, threatening future profitability and long-term financial stability.
Country-by-country reporting is therefore important to provide investors with the material information they need to properly assess what is now an extremely difficult risk to interpret. Transparency on tax data can help manage risk by reducing uncertainty about how aggressive companies’ tax practices are.
Why did Etica sign?
The letter is the latest in a series of initiatives undertaken by Etica, including signing the FACT Coalition’s letter to the OECD on corporate income tax disclosure and CbCR and signing the FACT Coalition’s 2019 letter on the same topic to the FASB (the US Financial Standards Accounting Board).
In addition, this legislation would support emerging international standards, including:
- the GRI Tax Disclosure Standard, which Etica helped to draw up by sending its comments;
- the FASB standards, supported by Etica by way of signing an investor letter;
- the OECD’s BEPS initiative, supported by Etica by way of signing an investor letter.
The letter is consistent with Etica’s engagement on tax issues, with the CbCR publication requests that it makes to companies during dialogue and with its collaborative engagement on this issue with the PRI network between 2017 and 2019.
The letter also represents another opportunity for engagement with public regulators and sovereign states.
More information and a complete list of signatory companies are available on the FACT Coalition website.
25 September 2020Responsible finance Tax havens transparency