Responsible Tax Engagement
Engagement International is dedicated to provide support in identifying and engaging with responsible tax laggards across both investor and procurement portfolios, aiming to promote transparency and accountability in corporate tax practices worldwide.
Engagement themes
Engagement with Tax Laggards in Investor Portfolios
Since 2019, Engagement International has identified responsible tax laggards for engagement within the MSCI World Index as 1) companies associated to severe tax related controversies or 2) companies with a low effective tax rate, calculated as average tax paid in cash during the last three years – without a good explanation. Until now we have focused on high-risk sectors as IT/tech, Extractive Industries, Pharma, Biotech, Hotels and Restaurants which are characterised by many intangible assets and international business operations. Many of these high tax risk companies use controversial low-tax jurisdictions or artificially fragmented tax arrangements with the sole purpose of reducing tax payment.
The engagement goals are 1) To identify companies in investment portfolios with the highest risk of controversial tax practices, poorest tax performance and lowest tax management and transparency and 2) To reduce the risk by encouraging the companies to improve their policies, management, governance and transparency when it comes to corporate tax, in order to become aligned with international norms and guidelines for responsible tax.
Engagement with Tax Laggards in Procurement Portfolios
In recent years Engagement International has supported Danish municipalities in identifying and engaging with tax laggards in which they are investing. Local municipality politicians believe that responsible tax engagement is especially relevant to them as public organisations, financed by tax proceeds and thereby depending on fair tax contributions from the companies they are investing in.
However, considering that the funds allocated by municipalities for purchasing IT, food, building materials, etc., are much larger than the amounts invested by them in listed equities and bonds, EI can conduct a similar responsible tax engagement with procurement laggards.
The approach is now tested in a pilot project with similar engagement goals and guidelines as used for responsible tax engagement with invested companies.
Client Benefits
Updated overview of companies in investment portfolios associated with the highest risk of controversial tax related practices.
Indication of companies that financially will be mostly affected by the coming global minimum tax of 15%.
Compliance with international norms and guidelines for responsible tax.
Alignment with growing expectations about avoidance of involvement in controversial tax practices.
Combatting unfair competition between countries and corporates due to tax avoidance.
Increasing tax revenue to finance public expenditures and addressing sustainability challenges and the SDG’s.