The growth of tax havens and unethical corporate tax conduct have become prominent concerns across the world. Aggressive tax avoidance negatively distorts national economies and undermines the ability of business to compete fairly, both domestically and internationally.

The pressure for change has now reached a tipping point. Across the world, there is now general agreement that tax laws need to be rewritten to end the global race to the bottom. Institutional investors and asset managers are paying much greater attention to the tax practices of companies in their portfolios, recognizing sound tax practices as an important sustainability issue and that companies employing aggressive tax practices could be exposing themselves to growing regulatory and reputational risks. Citizens across the world are insisting by a large majority that Government support for business (i.e., in connection with the Covid-19 pandemic) should be conditional on recipients ending the artificial use of tax havens and tax avoidance.

It is no longer enough for a business to claim that their tax conduct is acceptable as long as they are not breaking the letter of the law – in the same way that such a narrow framing of impact would be frowned upon if it were to be deployed with environmental and human rights considerations.

“Earnings that are reliant on tax planning rather than genuine economic activity are vulnerable to changes in tax regulation and enforcement… Even if specific tax regulations are not changed, more proactive enforcement by regulators suggests the earnings risk resulting from these strategies is increasing. As countries and their tax authorities become increasingly concerned with the exploitation of loopholes in international tax frameworks and are under fiscal pressure to fund additional government programmes, the incidence of tax disputes and litigation will increase.”
The United Nations Principles for Responsible Investment (PRI)