The manager of Norway’s Government Pension Fund Global (GPFG) has told the country’s Ministry of Finance that getting hold of good quality data on companies’ tax practices and tax risks is likely to remain a big challenge, despite the evolution of standards.
In a letter to the ministry on the topic of tax and transparency, Øystein Olsen and Nicolai Tangen – chair of Norges Bank Investment Management’s (NBIM) supervisory board and its chief executive officer respectively, wrote: “There is still a need for more effective frameworks and standards for corporate tax reporting.”
The pair wrote that the subsidiary of Norges Bank, the central bank, had plans to expand the tax analyses it performed, and see whether it could use new technology to gain an overview of tax policies and country-by-country data.
“We will develop new visualisation solutions to make information and analyses available to portfolio managers and so pave the way for an integrated approach to active management and ownership,” Olsen and Tangen wrote.
NBIM sent the letter in response to one from the ministry in mid-December asking Norges Bank to report on how it was following up an expectation document on tax and transparency, particularly in the light of a parliamentary request for more clarity on the issue.
NBIM said the expectation document was rooted in international principles, including the OECD Guidelines for Multinational Enterprises and the G20/OECD Principles of Corporate Governance.
“The expectations rest on three main principles: That taxes should be paid where the economic value is generated, that company tax arrangements are a board responsibility, and that public country-by-country reporting should be a key element of transparent corporate tax disclosure,” the NBIM leaders said.
“Aggressive tax behaviour can give rise to financial risks,” they said, adding that this was partly because firms engaged in this could be more exposed to changes to tax rules, and because limited transparency on tax practices could also be a sign of poor corporate governance.
Looking ahead, the pair said standards, analyses and reporting on tax were evolving, which would in time result in more consistent information across markets and sectors.
“Data and information on tax practices and tax risks will nevertheless remain a major challenge,” they added.
The organisation’s head of corporate governance spoke out against aggressive tax planning by companies a year ago, welcoming G20 efforts to increase clarity and transparency relating to multinationals’ tax strategies.
Openness on tax affairs became an area of increased public focus regarding the GPFG last year following Tangen’s appointment, with his previous use of tax havens becoming a major bone of contention in the public debate over his suitability as NBIM’s chief.
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