Strategizing Multinational Tax Risks

Click to access PIRC_TAX-BRIEF_FINAL.pdf

The cite above is a briefing from Pensions & Investment Research Consultants Limited (PIRC) summarizing their review of how asset managers engage their portfolio on tax matters. Interestingly, PIRC expects that US asset managers will need to review their tax approach and incorporate such provisions in their stewardship and voting guidelines.

Excerpts of the review:

• Where remuneration and performance are based on tax sensitive indicators, the concern is that companies will use riskier tax strategies for minimization; and they would vote NO for these remuneration related resolutions.
• Vote NO if non-audit fees > 50% of audit fees for the current year, or prior three years.
• Vote NO for proposals to reincorporate in another jurisdiction that appears to be motivated by aggressive tax planning
• Vote YES for disclosures of a company’s tax policy, referencing GRI 207-1 and GRI 207-2 (refer to prior post for GRI details).
• Vote NO to audit committee members who evidence no corporate tax management focus.
• Vote YES for public Country-by-Country Reporting (CbCR).
• Vote NO to financial statements do not publish CbCR.

Notwithstanding the above excerpts are sourced from an asset manager perspective, these trends are critical to monitor and align tax expectations/risks with the Audit Committee/Board of Directors. Imperative to these discussions is the presence of the tax executive in regular audit committees to discuss relevant tax risks, opportunities and provide transparency into the global governance process.