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​Eurosif concerned over tax amendments to Shareholder Rights Directive

Eurosif has questioned attempts by the European Parliament to introduce greater corporate tax transparency by amending the Shareholder Rights Directive.

The sustainable investment association stressed that it was wholly supportive of the introduction of country-by-county reporting (CBCR) for all listed companies but said that agreeing an “ambitious” text for the Shareholder Rights Directive was a priority.

European parliamentarians recently voted on an amended draft of the directive, which proposed the introduction of CBCR, currently only mandated for banks and extractive industries.

But they watered down a pledge for a binding vote on pay by leaving it to individual member states to decide if shareholders should be granted one.

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The binding vote on executive remuneration was at the heart of the Commission’s initial legislative proposal and hailed as a step towards a greater focus on long-termism by then-commissioner Michel Barnier.

In a position paper, Eurosif added that it was aware of the argument CBCR could be “burdensome and onerous” if imposed on all listed companies.

“We therefore recommend policymakers think about ways to focus to alleviate such burden and make recommendations in that direction,” it said. 

It also argued that it would be preferable to amend accounting regulation, rather than the Shareholder Rights Directive, as a means of introducing CBCR.

Eurosif said the rationale for institutional investors backing CBCR was one of managing reputational risk.

It noted that the distinction between illegal tax evasion and legal tax avoidance had “dissolved in the eyes of governments, NGOs and citizens”.

It added that aggressive tax practices risked undermining a company’s sustainability strategies, and that the short-term gains or profits achieved by such tactics could fall away as a result of the medium to long-term impact of reputational risk. 

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