More than 20 per cent of Amazon’s shareholders voting for a proposal to force the tech firm to provide greater tax transparency provides a “strong signal” and should encourage the new Australian government to enforce better tax reporting for multinationals, according to the Centre for International Corporate Tax Accountability and Research.
For the first time ever, shareholders in Amazon voted on a tax-related proposal last week, calling on the company to adopt the new GRI standard and provide a country-by-country breakdown of its income, revenue and taxes in Australia and the other countries that it operates in.
It came after reports that Amazon is engaging in “aggressive tax avoidance”, particularly through its Amazon Web Services (AWS) business, which regularly lands lucrative government contracts.
A recent report found that AWS has landed $626 million in Australian government contracts but has paid “negligible” tax in the country. It found AWS had revenue of $600 million in Australia in 2020 but paid only $16 million in tax.
When the proposal was put forward for a vote, more than 20 per cent of Amazon shareholders, representing $US144 billion, backed the initiative – excluding the near-13 per cent of the company owned by its founder Jeff Bezos.
This has been lauded as a significant win for tax transparency and the organisations that have been pushing for the proposal.
The vote sent a “strong signal” and should motivate the new Australian government to follow through its election promise to implement country-by-country tax reporting for multinationals operating in the country, Centre for International Corporate Tax Accountability and Research (CICTAR) principal analyst Jason Ward said.
“The level of support for this tax transparency resolution, the first of its kind for any US multinational, sends a strong signal to Amazon that its investors are concerned about the company’s approach to tax and the lack of transparency,” Mr Ward told InnovationAus.com.
“The resolution was backed by some of the world’s largest investors and shareholder support for greater tax transparency at Amazon and other tech giants will continue to grow.
Australia has an opportunity to lead the way on these issues, and doing so will help local firms better access government contracts, Mr Ward said.
“The support from global investors should encourage the new Australian government to move swiftly to implement full public country-by-country reporting for all multinationals, as was pledged before the election,” he said.
“Australia has an opportunity to lead globally and help drive the trend towards greater tax transparency. Requiring greater transparency for multinationals will help level the playing field and give local Australian companies – capable of providing cloud computing services – a genuine opportunity to compete for government contracts.
“It’s time to move from rhetoric to action and genuinely stimulate jobs, tax payments and innovation in Australia.”
The proposal was put forward by CICTAR and the PIRC, whose responsible tax lead Dr Katie Hepworth said the vote represents a “seismic shift in investor expectations on tax transparency”.
“It puts all companies on notice to disclose country-by-country tax and financial information, especially those multinationals in sectors that have historically been singled out for tax avoidance: tech and pharma,” Dr Hepwroth said.
“Amazon has repeatedly shown itself to be out of step with investor expectations on tax, and as a company that is afraid of investor and community oversight.”
FACT Coalition executive director Ian Gary said the “historic vote” is “yet another indication of the unstoppable momentum for greater multinational corporate tax and financial transparency”.
“Investors said loud and clear that they need tax transparency to understand the financial, regulatory and reputational risks companies may face due to blatant tax avoidance strategies,” Mr Gary said.
“Amazon and other multinationals already share this information privately with tax authorities. It’s only the public, workers, investors and policymakers who are kept in the dark. Tax transparency gives us a flashlight to see the corporate tax practices at play, and fuels a public debate on fixing our broken tax system.”
The proposal was backed by prominent Amazon investors including Norway’s state pension fund, UK investment fund Legal & General Investment Management and the New York City Comptroller, while proxy advisor firm Glass Lewis also recommended voting for it.
In terms of Australian investors in Amazon, CBUS and VisionSuper both supported the proposal.
The proposal resolved for Amazon to issue a tax transparency report to shareholders, prepared in consideration of the indicators and guidelines set forth in the GRI tax standard.
“With the Covid-19 pandemic resulting in large deficits for many governments, there has been increased government and community focus on whether corporations are paying a ‘fair share’ of tax and contributing to societies where profits are earned,” the proposal said.
“Currently, Amazon does not disclose revenues, profits or tax payments in non-US markets, challenging investors’ ability to evaluate the risks to our company of taxation reforms, or whether Amazon is engaged in responsible tax practices that ensure long-term value creation for the company and the communities in which it operates.”
Amazon had attempted to prevent the proposal being voted on, and recommended that shareholders vote against it.
“We believe the prescriptive granularity of the GRI Tax Standard’s reporting would potentially force disclosure of competitively sensitive information about our operations and cost structures and would hamper our ability to make operational decisions,” the company said.
“Providing disclosure solely on our rate of income tax distorts the other significant tax contributions we make such as property taxes, payroll taxes, taxes on gross receipts and the many other taxes we pay in the communities in which we operate.”
Shareholders holding more than 64,000,000 shares in Amazon voted for the proposal, while more than 305,000,000 voted against it and more than 3,000,000 abstained.
