By Edmund Bourne, Senior Analyst, SI Research
Earlier this month, the world’s leading economies inked a historic deal to rewrite the rule book on taxation. The deal, signed by 136 nations including all G20 countries, will introduce a global minimum corporate tax rate of 15% and grant countries new rights to tax large companies based on where they earn their revenues, rather than where they are located. The culmination of more than four years of development and negotiation, the agreement arguably represents the most significant change to the international tax system for a century. US Treasury Secretary Janet Yellen noted it was "a once-in-a generation accomplishment for economic diplomacy."
There is still plenty for policymakers to do to make these rules a reality. However, the timelines are strikingly short for a reform of this magnitude, with the OECD targeting 2023 for effective implementation of the new rules.
Investors will chew through the implications of the new rules for their portfolios for a while. However, one thing is already clear: as regulatory scrutiny intensifies, the reforms are putting a very uncomfortable spotlight on companies with poor or opaque tax practices. In the past, we’ve seen these practices have an immediate and quantifiable impact on corporate earnings. Both Facebook and Google have faced substantial regulatory fines in recent years as a result of their tax practices (€100 million and €1 billion respectively.)
Indeed a lack of relevant disclosures remains a considerable roadblock to measuring and managing risks within portfolios from poor corporate tax practices. Tax transparency has historically not been a central focus of investor engagement or key sustainability reporting standards and correspondingly reporting is relatively limited.
When we evaluated the tax transparency practices and disclosures of 1,380 large cap companies worldwide as part of research commissioned by the UN PRI, our analysis found that, compared to other sustainability issues like climate change or health and safety, reporting on tax is still in its infancy (See figure 1  ). Over half of companies globally make no material disclosures on tax (See Figure 2).
However, as an increasing number of investors begin to recognize tax transparency as a sustainability issue, they look set to demand greater transparency at their portfolio companies.
Read our UN PRI commissioned research on Global Trends in Corporate Tax Disclosure here or listen to our recent conversation.
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 As at 10/10/21, 136 of the 140 countries in the OECD/G20 Inclusive Framework on BEPS had signed up to the deal. 4 countries (Sri Lanka, Pakistan, Nigeria, and Kenya) were holding out on signing up.
International community strikes a ground-breaking tax deal for the digital age - OECD, accessed 10/10/21. These changes were also endorsed by the G20.
 Reuters, ‘Facebook to pay more than $110 million in back taxes in France’, accessed 11/10/21.
 Reuters, ‘Google to pay $1 billion in France to settle fiscal fraud probe’, accessed 11/10/21
 In December 2019, GRI launched the first comprehensive cross-sectoral reporting standard on tax disclosures for corporates (GRI 207:Tax 2019
 ‘Material disclosures’ on tax are defined as those meeting any of the indicators within the FTSE Russell tax transparency framework – see our paper ‘Global trends in corporate tax disclosure’ for further details.
 Statistics for tax transparency and climate change are based on a sample of c. 1380 large cap companies in developed and emerging markets, and a subset of c. 730 of these companies for which Health & Safety data are available. Quantitative datapoints are defined as country-by-country breakdown of tax paid; Scope 1 and 2 GHG emissions; and current year fatalities for Health & Safety.
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