2022 Was the Year of Significant Progress in Tax Transparency
By Robert Stewart
Some companies are able to avoid paying taxes through using accounting maneuvers to Shareholders want to ensure risks associated with tax avoidance will not harm a company’s value. The only way to ensure corporations are paying their fair share is to disclose companies’ pertinent tax information to the public and investors and luckily we are making progress in the U.S..
2022 saw a huge amount of momentum on tax transparency, driven in large part by the success of investor advocates in bringing new transparency resolutions to a vote. For example, in May of 2022 a groundbreaking shareholder resolution was filed for Amazon’s annual meeting. Unlike previous attempts to bring similar proposals, the SEC in 2022 allowed this resolution to move forward. The extremely profitable tech company is notorious for its corporate tax avoidance practices as well as the huge sums of money it spends to influence U.S. policymaking. Amazon paid $0 in federal income taxes in 2018 while reporting a record $11 billion in profits. In 2021, the company averaged a meager tax rate of just over 5% on nearly $80 billion in profits over the previous four year period, while the average American a paid a federal tax rate twice that of over 13%. Investors in Amazon do not have much information on why the company pays so little in taxes and wanted to hold the company more accountable for its secretive tax practices and that is why they filed a shareholder resolution on tax transparency.
Microsoft and Cisco shareholders similarly wanted to hold their board of directors accountable and ensure that the corporations expose how they avoid paying their fair share in taxes. Both Microsoft and Cisco held annual general shareholder meetings in December 2022, where tax transparency resolutions were filed and the outcome of the votes illustrated significant progress since the Amazon shareholder meeting in May of 2022. Even though these resolutions unfortunately didn’t receive the majority vote outcome we hoped for, many newly-introduced proposals receive votes of less than 5% . However, the Microsoft proposal garnered 23% and the Cisco vote had nearly 27%. It is important to note that the Amazon vote only received 17.5%. This shows a lot of upward momentum in only a few short months with a greater than 50% increase in the level of shareholder support for these proposals from the Amazon vote to the Cisco resolution vote.
Exxon, Chevron, and ConocoPhillips. Their shareholder meetings will be held this May so stay tuned for ways to get involved in this advocacy.
But, it’s not just investor resolutions that are pushing this forward momentum. In 2022, two American based companies, Hess Corporation and Newmont Corporation, became the first US multinational corporations to voluntarily embrace tax transparency by publishing their international tax information in accordance with the Global Reporting Initiative’s (GRI) standards. The Global Reporting Initiative is a voluntary independent standard setter that guides businesses, government, and the environment at large in embracing sustainability. Given that these two companies are now voluntarily disclosing, our nation’s leaders should create a level playing field and ensure all companies are similarly coming clean regarding their tax practices. After all, why would a company not want to be transparent if they are not engaging in risky tax dodging behavior?
Luckily, it seems that the U.S. is getting closer to ensuring tax transparency for companies will a requirement, not a choice. For example, the taking up tax transparency this year with potential rulemaking. FASB is the body that governs accounting policies in the United States through what is called “Generally Accepted Accounting Principles.” The Securities and Exchange Commission (SEC) is a governmental agency focused on protecting investor’s interests that has recognized FASB, a private nonprofit, as the official body focused on creating and improving accounting standards FASB is expected to release draft rules by late March and ask the public to submit input on the proposed rules.
While 2022 saw great progress on the road to greater tax transparency from companies, it is essential that those interested in fight to ensure that corporations pay their fair share of taxes continue to stay engaged. While Public Citizen activists have been extremely helpful in our advocacy by signing petitions, voting in shareholder meetings, agreeing to write Letter to the editors, we must continue to