Amazon under investor pressure over tax transparency

KATHMANDU: Twenty four institutional investors in Amazon are putting pressure on the ecommerce group to increase transparency on where and how much it pays in tax around the world.

The investors — who include asset managers Nordea, Royal London and several large European and US pension funds — are trying to get a shareholder resolution brought at the group’s annual meeting this year, which if passed would significantly overhaul the company’s tax public disclosures.

The resolution demanding Amazon adopt a new reporting standard on tax practices was originally brought by a Catholic investment fund and UK public retirement scheme in December.

Amazon, which has attracted criticism over its tax transparency in the past, is challenging the resolution. In January it wrote to the US Securities and Exchange Commission requesting approval for the resolution to be excluded from voting at its next AGM. Amazon argued that its tax affairs are an ordinary business matter and therefore subject to a shareholder resolution exemption.

However, the investors backing the motion, who collectively oversee assets of around $1.2tn, are pushing back and are lobbying the SEC to allow the proposal.

“A company’s tax practices are financially material,” they said in a letter to the body, which will be sent early this week and seen by the Financial Times. “Aggressive tax practices can expose a company — and its investors — to increased scrutiny from tax authorities, adjustment risks, and increase their vulnerability to changes in tax rules as countries look to protect their tax bases from deleterious practices.”

They argued they needed “to be provided with sufficient information to gauge a company’s tax position and governance approach and anticipate future impacts on and risks to their holdings”.

The shareholder resolution calls on Amazon’s board to issue a tax transparency report to shareholders, “at reasonable expense and excluding confidential information” in accordance with the Global Reporting Initiative’s (GRI) tax standard.

This model requires companies to make a public disclosure of their business activities, revenues, profit and tax paid in each country they operate in. Amazon does not currently publicly disclose its revenues, profits or tax payments on a country-by-country basis outside the US.

The investors argued the compliance burden for Amazon to adopt the increased disclosure would be “minimal” as multinationals are already required to provide country-by-country tax information to the US tax authority, under existing international rules.

This information is shared by tax authorities but is not released to the public. Any additional compliance “would be significantly outweighed by the benefits of these disclosures to investors,” they said.

Amazon said it “already provides extensive and detailed disclosure regarding its income tax contributions . . . in the United States in its publicly filed annual and quarterly reports to the Commission” and added it “also has publicly reported on its total tax contributions in the United States as well as the United Kingdom, Italy, France, and Spain”.

More than 100 groups overseeing $3.6tn in assets signed the letter, including the New York City Office of the Comptroller, which oversees the city’s public pension funds of $274.7bn, and the £82bn Universities Superannuation Scheme, the UK’s largest private pension fund by assets.

Signatories also included several environmental, social and governance-focused and religious funds, although not all of these invest in Amazon.

The original shareholder resolution was filed by the Missionary Oblates of Mary Immaculate, a Catholic investment fund and the Greater Manchester Pension Fund. Shareholder advisory group Pirc co-ordinated the letter. FT