The manager of Norway’s NOK10tn (€923bn) sovereign wealth fund, the Government Pension Fund Global (GPFG), has welcomed G20 efforts to increase clarity and transparency relating to multinationals’ tax strategies, and said companies do not need to behave aggressively on tax to create long-term value.
Norges Bank Investment Management (NBIM) made the comments in a letter to the OECD’s Centre for Tax Policy and Administration, in response to a consultation.
In the letter, Carine Smith Ihenacho, NBIM’s chief corporate governance officer, and the central bank unit’s head of sustainability within corporate governance, Wilhelm Mohn, wrote: “Maximising long-term value does not require aggressive tax behaviour.”
They said NBIM welcomed the OECD’s objective of addressing existing incentives for companies to shift profit geographically for tax purposes.
“As an investor, NBIM expects multinational enterprises to exhibit appropriate, prudent and transparent tax behaviour,” the pair said, adding that in line with the G20/OECD principles of corporate governance, its own starting point was that company boards should oversee tax strategies and planning.
Between 6 February and 6 March, the OECD has been consulting on its review of country-by-country reporting, which is being carried out within the OECD/G20 BEPS Action 13 – a project to tackle corporate tax planning strategies used by multinationals to shift profits from higher-tax jurisdictions to lower-tax jurisdictions.
Although the country-by-country reports covered by the BEPS Action 13 minimum standards were intended for tax authorities, NBIM said, the changes to these standards might also inspire greater consistency in public country-by-country reporting for companies wanting to undertake voluntary reporting.
Public country-by-country reporting was a core element of transparent corporate tax disclosure, said Smith Ihenacho and Mohn.
“Complex or opaque ownership and organisational structures hamper transparency and may compromise investors’ fundamental financial analysis,” they said.
It seemed unlikely, they said, that transparent geographical reporting of value generation – and the taxes paid in relation to that value – would necessarily hurt competitive advantage.
“It is not clear that the principal content of such reports would comprise sensitive information on which commercial competitors could capitalise,” they went on.
Institutional investors benefitted from well-functioning, consistent, predictable and transparent tax reporting frameworks, the pair noted, adding that to ensure harmonisation and reduce uncertainty, NBIM backed international standards for tax-related corporate disclosure to authorities.
“We, therefore, welcome the proposed modifications to the BEPS Action 13 minimum standards that would provide more predictability in terms of which companies fall within the scope of a country-by-country filing obligation,” NBIM said in the letter.