Investors managing more than $506 billion in assets will push tech giant Microsoft to provide greater transparency of its tax practices around the world, including in Australia.
Pensions & Investment Research Consultants (PIRC) will put forward a shareholder proposal at Microsoft’s annual investor meeting this year calling on the company to provide public country-by-country reporting and publish a report in line with the GRI Tax Standard.
It comes after more than 20 per cent of Amazon shareholders voted in favour of the same proposal for that company in May, sending a “strong signal” that the Australian government should enforce better transparency around the tax practices of multinationals.
Investors backing the proposal include Nordea, AkademikerPension and Greater Manchester Pension Fund, who in total manage more than $US350 billion in assets ($506 billion).
The proposal says that Microsoft does not currently disclose revenues or profits in any market apart from the US, and that its foreign tax payments are not disaggregated.
“[This is] challenging investors’ ability to evaluate the risks to our company of taxation reforms, or whether Microsoft is engaged in responsible tax practices that ensure long-term value creation for the company and the communities in which it operates,” the proposal says.
“This proposal would bring our company’s disclosures in line with leading companies who already report using the tax standard. Our company already reports country-by-country reporting information to OECD tax authorities privately, so any increased reporting burden is negligible.”
Microsoft holds a whole-of-government deal with the Australian government now worth more than $800 million. This deal allows multiple government agencies to use common Microsoft applications and security services, and was reissued in 2019.
The PIRC will also be putting forward the same tax proposal at an upcoming Cisco meeting. The organisation said that Cisco’s global tax strategy document provides “insufficient information” on governance and risk management and is not “fit for purpose”.
The PIRC is working with the Centre for International Corporate Tax Accountability and Research (CICTAR) to actively engage with companies operating in sectors with a history of aggressive tax avoidance, and sectors with significant exposure to government contracts.
The Amazon proposal was voted down, but more than 20 per cent of the company’s shareholders backed it.
A recent CICTAR report found that Amazon is engaging in “aggressive tax avoidance”, particularly through its Amazon Web Services (AWS) subsidiary.
The report said that AWS has landed $626 million in Australian government contracts but has paid “negligible” tax in the country. It found that AWS had revenue of $600 million in Australia in 2020, but paid just $16 million in tax.
The support for the tax proposal should encourage the new Labor government to enforce greater transparency around the tax practices of multinationals, CICTAR principal analyst Jason Ward said.
“Australia has an opportunity to lead globally and help drive the trend towards greater tax transparency. Requiring greater transparency for multinationals will help level the playing field and give local Australian companies – capable of providing cloud computing services – a genuine opportunity to compete for government contracts,” Mr Ward told InnovationAus.com in early June.
“It’s time to move from rhetoric to action and genuinely stimulate jobs, tax payments and innovation in Australia. The support from global investors should encourage the new Australian government to move swiftly to implement full public country-by-country reporting for all multinationals, as was pledged before the election.”
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