Moving towards best practice for responsible taxation
What does responsible tax for companies look like? Depending on who you ask, you’re likely to get some very different responses.
For some, it is about paying a fair share and making sure businesses support the societies, infrastructure and public services that they benefit from. For others, the focus may be on risk and ensuring they really understand how and where a company generates its profits.
Whatever lens you’re looking through, it’s clear that responsible tax is firmly embedded in the public’s awareness. It’s also something that companies and investors are rightly finding increasingly difficult to ignore.
Our engagement activity on tax
Rathbone Greenbank first began engaging on this issue in 2010, against a backdrop of protests co-ordinated by the UK Uncut anti-austerity campaign network. Targeting companies accused of tax avoidance, these headline-grabbing demonstrations were proof that companies needed to take notice of tax.
Our small group of UK investors has since merged into an international working group on tax, co-ordinated by the Principles for Responsible Investment (PRI) initiative.
Dialogue with companies has continued, encouraging greater transparency on tax policies, governance structures and practices. And we have also helped to produce a series of guides and investor recommendations to encourage other investors to start asking companies questions about tax.
Company attitudes on tax are shifting
A parallel project, co-ordinated by The B Team (a not-for profit organisation which promotes responsible business practice), recently launched a set of responsible tax principles at the World Bank's Platform for Collaboration on Tax event in New York.
These cover issues such as tax strategy, interactions with tax authorities, and transparency – mirroring many of the topics our investor group has been discussing with companies.
The principles were developed with input from businesses, civil society and investors (including Rathbone Greenbank). Open discussions helped to build understanding between participants and created a framework which is demanding but achievable.
Importantly, a founding group of nine multinational companies endorsed the principles at their launch. This demonstrates that companies are willing to take a leadership position on responsible tax, improving both practices and reporting standards.
Pressure on companies will continue
Nine companies committing to a framework for responsible tax is clearly not the end of the journey. But it is an important step in the right direction.
Civil society and NGOs also play a key role alongside investor and industry action. Initiatives such as the Fair Tax Mark or the recently launched Church Action for Tax Justice are helping to shift corporate behaviour by recognising good practice and encouraging further improvement.
Rathbone Greenbank will continue our engagement work on this important issue via an international engagement project, involving over thirty investors, which is due to begin later this year.