Tax Secrecy: GRI Consultation, New Minerva Guidelines

Academic research has found that tax avoidance can increase the risk of share price crash [1] and the public revelation of aggressive tax avoidance can result in negative investor reaction and potential significant reputational costs[2]. Tax management is therefore a strategic business issue which can pose a material financial risk to investors.

To help companies and investors improve their tax reporting, the Global Reporting Initiative (GRI) has published a new topic-specific Standard: Tax and Payments to Governments for public comment. The Standard is intended to promote greater transparency on a company disclosure on taxes,including strategy, governance, and information on actual taxes and payments to governments. The key inclusions in the Standard are new management approach disclosures on tax-strategy and new topic-specific disclosures on country-by-country reporting of financial, economic, and tax-related data for each jurisdiction in which a company operates, including payments to governments.

GRI's proposed Standard was developed by an expert, multi-stakeholder Technical Committee which included Alex Cobham, chief executive of TJN and, from the investment management community, Robert M. Wilson, Jr. a research analyst at MFS Investment Management.  Since 2017, The Technical Committee has been focussed on finding ways of making tax reporting more transparent and accessible for a range of stakeholders.  Commenting on the launch of the consultation, Alex Cobham, CEO of TJN said: “it’s very important that we hear the views of as many investors as possible on this critical issue and we urge asset owners and managers to get involved in the GRI Consultation.”

Minerva also today launched its latest Regulatory Briefing: Tax Secrecy which identifies the key issues for investors and provides helpful guidance for trustees and governance officers to help them incorporate good practice into their proxy voting guidelines.

For many years Manifest's research reports have identified material non-audit and tax-related fees as part of each auditor election proposal. From proxy season 2019, Minerva's research and voting guidelines will incorporate the Tax Justice Network's Financial Secrecy Indicators to flag those companies incorporated in high secrecy jurisdictions.

Get your copy of the Minerva Regulatory Briefing: Tax Secrecy today to find out more about the latest sustainability governance and voting guidelines.

For more information, please contact hello@minerva-analytics.info

[1] Kim, J.-B., Y. Li, and L. Zhang. 2011. Corporate tax avoidance and stock
price crash risk: Firm-level analysis. Journal of Financial Economics 100
(3):639-662

[2] Hanlon, M., and J. Slemrod. 2009. What does tax aggressiveness signal?
Evidence from stock price
reactions to news about tax shelter involvement. Journal of Public Economics
93 (1):126-141