Reuters reports that growing anger at aggressive tax avoidance by big business has prompted ethical investors to consider shunning shares in companies that don’t pay their fair share of tax.
As governments struggle to balance massive budget deficits caused by the financial crisis, reports that a number of big companies pay minimal taxes in some big markets have sparked public protests in Europe and the United States. According to Reuters, all the companies criticised say they follow the law, and some argue they owe it to investors to pay as little tax as legally possible. But politicians on both sides of the Atlantic have argued such avoidance is immoral and hauled executives into public hearings to explain their tax affairs.
Many investors with a “socially responsible” mandate say they have long taken account of companies’ tax practices when deciding where to invest, but few if any funds have made a point of screening out companies over tax issues, according to more than a dozen industry professionals contacted by Reuters. That may be about to change. FTSE Group, which compiles the share indexes that fund managers in the UK, United States and Asia use to build investment portfolios, said it was looking into excluding companies with what it called overly aggressive tax reduction policies from its ethical index group, FTSE4Good. FTSE did not say when it would reach its decision. (Reuters report by Tom Bergin and Sinead Cruise.)
[LTN 13, 21/1/13]