Securities and Exchange Commission

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July 31, 2024

Vanessa Countryman

Secretary

Securities and Exchange Commission

100 F Street NE

Washington, DC 20549

Via electronic mail

Re: Petition for Rulemaking to Require Disclosure of Tax-Relevant Information for Each Country

Dear Chair Gensler and Commissioners:

We respectfully submit this petition for rulemaking pursuant to Rule 192(a) of the Securities and

Exchange Commission’s (the “Commission”) Rules of Practice.1

We urge the Commission to initiate a rulemaking to amend Regulation S-X to require issuers to provide

additional disclosure of basic tax and relevant financial and operational information disaggregated by

country.2 This information is referred to as country-by-country-reporting (“CbCR”), as defined further

below. This disclosure requirement will advance the Commission’s mission of protecting investors,

maintaining fair, orderly, and efficient markets, and facilitating capital formation.

17 C.F.R. § 201.192(a).

We have previously made a similar recommendation to the Commission in response to the 2016 concept release

under Regulation S-K. Comment Letter on Concept Release on Business and Financial Disclosure Required by

Regulation S-K, THE FACT COALITION (Jul. 6, 2016), https://www.sec.gov/comments/s7-06-16/s70616-28.pdf.

We were not alone. Overall, tax was the single most commented area of that concept release: “99 percent of all

comments received raised the issue, and nearly all of them expressed clear support for expanded disclosures. Not a

single commenter clearly objected to expanded tax disclosures.” Tyler Gellasch, Towards a Sustainable Economy: A

Review of Comments to the SEC’s Disclosure Effectiveness Concept Release, THE FACT COALITION (Sep. 2016), pp.

21, https://thefactcoalition.org/wp-content/uploads/2016/09/Towards-A-Sustainable-Economy-Report.pdf.

Significantly, the Commission’s own Investor Advisory Committee (IAC) noted, “Committee further felt that the

Commission should take steps to ensure that its disclosure requirements keep pace with evolving international

standards in the area of country by country tax reporting.” Comment Letter on Concept Release on Business and

Financial Disclosure Required by Regulation S-K, IAC (Jun. 15, 2016),

https://www.sec.gov/spotlight/investor-advisory-committee-2012/iac-approved-letter-reg-sk-comment-letter-062016.

pdf.

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Page 2 of 21

We set out the following arguments in support of this petition:

1. The Commission has clear statutory authority to require improved tax disclosure pursuant to the

Securities Exchange Act of 1934.

2. This information is highly material to investors and will allow them to evaluate significant and

growing tax risks.

3. These disclosures are demanded by investors.

4. Investors currently lack adequate tax information in issuers’ filed reports and other public

sources.

5. Some companies are voluntarily disclosing CbCR information, demonstrating that it is feasible

and beneficial.

6. The overall regulatory costs are minimal.

Statement of Interest

The Financial Accountability and Corporate Transparency (FACT) Coalition, a non-partisan alliance of

more than 100 organizations3, has prepared this petition on behalf of the undersigned [87] petitioner

investors with more than [$2.3] trillions in assets under management. The undersigned investors have a

shared, demonstrated interest in additional disclosures necessary to help them to evaluate material

financial risks associated with companies’ tax practices, as explained below.

Introduction

In today’s world of global commerce, investors4 are in need of better understanding where companies

generate revenue, where they book taxable income, and how they conduct their global business. As

detailed in FACT’s 2022 report, A Material Concern: The Investor Case for Public Country-by-Country

Reporting, the answer to these investor needs is public country-by-country-reporting.5

Investor demands for increased corporate tax disclosures reflect a growing international consensus in

favor of public CbCR. In 2018, after member governments of the Organization for Economic Cooperation

The views presented in this petition are not necessarily endorsed by every member of the FACT Coalition.

We use the term “investors” broadly throughout this petition to include shareholders as well as lenders and

creditors. Investor needs we outline here are also applicable to other users of financial statements, such as

investment analysts and rating agencies. We acknowledge that additional stakeholders may also find this information

useful for other purposes, but their needs are not covered in this petition.

A Material Concern: The Investor Case for Public Country-by-Country Tax Reporting, THE FACT COALITION (Jul.

28, 2022),

https://thefactcoalition.org/report/a-material-concern-the-investor-case-for-public-country-by-country-tax-reporting

(hereafter, “A Material Concern”).

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Page 3 of 21

and Development (“OECD”), including the United States, reached agreement on a confidential CbCR

standard, they began requiring covered multinationals to file that information on an annual basis with

their respective tax authorities (including the Internal Revenue Service (“IRS”)), and began exchanging it

among participating tax authorities.6 In 2019, the Global Reporting Initiative (“GRI”), an independent,

international organization that sets the global best practice standards for corporate public reporting, issued

its Tax Standard 207-4 (“GRI 207-4”)7 and has since seen multiple companies begin disclosing public

CbCR information in line with its standard. In 2021, the European Union (“EU”) adopted a directive on

public CbCR, building on related requirements already in place for its banking and extractive sectors and

mandating implementation by the summer of 2024.8 The EU disclosure requirements are expected to

affect more than 1/3 of large U.S. multinationals.9 Meanwhile, Australia has introduced legislation that

will require CbCR in line with the GRI 207-4 standard for a number of high-risk jurisdictions.10 In light of

the growing global support for public corporate tax disclosures, it is time for the United States to align

itself with its allies and international best practice by issuing its own public CbCR disclosure

requirements consistent with GRI-207-4.

The Commission should adopt GRI 207-4, because it is the leading global standard in this area, is widely

supported by investors,11 and is followed by companies that are already voluntarily publishing their CbCR

information. GRI 207-4 presents a higher disclosure standard than currently required by the Commission,

as detailed in Part 4 below. Under GRI 207-4, the information that must be reported for each relevant

Action 13: Country-by-Country Reporting, OECD,

https://www.oecd.org/tax/automatic-exchange/about-automatic-exchange/country-by-country-reporting.htm.

GRI 207: Tax 2019, GLOBAL REPORTING INITIATIVE (2019),

https://www.globalreporting.org/standards/media/2482/gri-207-tax-2019.pdf.

Directive (EU) 2021/2101 of the European Parliament and of the Council of 24 November 2021 amending

Directive 2013/34/EU as regards disclosure of income tax information by certain undertakings and branches, 64

OFFICIAL J. OF THE EUR. UNION L 429/1 (Dec. 1, 2021),

https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=OJ:L:2021:429:FULL.

Giulia Aliprandi & Kane Borders, Advancing Corporate Tax Transparency, EU TAX OBSERVATORY (Jun. 2024),

https://www.taxobservatory.eu/publication/advancing-corporate-tax-transparency.

Parliament of Australia, Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Bill

2024, (June 5, 2024)

https://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/Bills_Search_Results/Result?bId=r7199.

Jennifer Thompson, Investment groups want companies to disclose global taxes, FIN. TIMES (Dec. 4, 2019),

https://www.ft.com/content/d84eeafc-16c6-11ea-9ee4-11f260415385. “Backing for GRI’s Tax Standard,” GLOBAL

REPORTING INITIATIVE (Dec. 5, 2019),

https://www.globalreporting.org/news/news-center/backing-for-gri-s-tax-standard. Investors comprised the majority

(55%) of those who submitted feedback during the consultation to develop the GRI Tax Standard. “We need to talk

about tax,” THE GRI PERSPECTIVE (July 2022),

https://www.globalreporting.org/media/amyaycyg/gri-perspective-we-need-to-talk-about-tax.pdf.

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jurisdiction includes: corporate income cash taxes paid, corporate income tax accrued, related party

revenues, third party revenues, net profit or loss, tangible assets, and employee headcount.

GRI 207-4 is a more suitable standard for investor purposes than the confidential CbCR standard

developed by the OECD and implemented by the IRS.12 The OECD standard is not a focus of this

petition, because it is intended for tax administrators rather than investors. As such, information reported

pursuant to the OECD standard is not made available to investors for individual companies, but only

aggregated by industry or geographic region.13 Individual company information can be accessed only by

the IRS and confidentially exchanged with tax authorities with whom the United States has concluded a

bilateral agreement.14 Because the OECD did not consider investor needs in developing its standard, this

confidential regime is of very limited relevance to the Commission’s consideration of this issue.

A development that is more relevant for the Commission is the recent update by the Financial Accounting

Standards Board (“FASB”) to its income tax accounting standard (Topic 740).15 This recent revision is a

welcome and overdue improvement that will provide valuable additional information to investors,

particularly with regard to how public businesses justify their effective tax rates. However, the new rate

reconciliation disclosures are limited (because the rates are generally reconciled only to the United States

tax rate, the FASB disclosure would do little to reveal tax risks relating to profits shifted among other

countries)16 and overall not as useful for investors as CbCR.17 FASB’s revised tax disclosure standard falls

short of public CbCR, as it is limited in scope with regard to the types of companies and metrics it covers.

26 C.F.R. § 1.6038-4.

See. e.g., SOI Tax Stats - Country by Country Report, INTERNAL REVENUE SERVICE,

https://www.irs.gov/statistics/soi-tax-stats-country-by-country-report (last updated Apr. 11, 2024).

Country-by-country reporting jurisdiction status table, INTERNAL REVENUE SERVICE,

https://www.irs.gov/businesses/country-by-country-reporting-jurisdiction-status-table (last updated Jun. 6, 2024).

FASB Accounting Standards Update No. 2023-09, Income Taxes (Topic 740), FIN. ACCOUNTING STANDARDS BOARD

(Dec. 2023), https://www.fasb.org/Page/ShowPdf?path=ASU+2023-09.pdf. Public companies must follow the new

FASB standard for annual periods beginning after Dec. 15, 2024 (for calendar-year companies, this means in their

2025 10-Ks). Privately held businesses have an extra year to comply.

More broadly, tax rate differentials are likely to shrink significantly as a result of the OECD’s global minimum tax

reforms. Felix Hugger, et al., The Global Minimum Tax and the taxation of MNE profit: OECD Taxation Working

Papers No. 68, OECD (Jan. 9, 2024), at [59], p. 28,

https://www.oecd.org/tax/beps/the-global-minimum-tax-and-the-taxation-of-mne-profit-9a815d6b-en.htm.

As one investor commented to FASB, “While company exposure to such jurisdictions [where the tax risk is

highest] may be indicated to some extent through the rate reconciliation disclosures, we believe full

country-by-country reporting of taxes paid, accompanied by corresponding revenue and taxable income figures,

greatly increases the utility of these disclosures to investors.” Comment by Norges Bank Investment Management

(NBIM) (May 25, 2023),

https://fasb.org/Page/ShowPdf?path=TAXDISC.ED.012.NORGES%20BANK%20INVESTMENT%20MANAGEM

ENT%20IHENACHO%20MOHN.pdf

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It is up to the Commission to build on this progress and close the remaining gaps. First, FASB’s changes

only apply to domestic companies and not US-listed foreign companies that follow a different accounting

standard, including the International Financial Reporting Standards (IFRS) set by the International

Accounting Standards Board (“IASB”). Second, crucial items such as employee headcount are not metrics

under the Generally Accepted Accounting Principles (“GAAP”), and as such are outside of FASB’s

purview. FASB declined investor requests to include critical metrics, including revenue and income/loss,

in its final tax disclosure standard, citing a desire to avoid delay.18 This missing operational information is

particularly vital to contextualizing and evaluating tax-related risks facing a given multinational.19 For

example, investors have no way to assess the growing risk of digital service taxes which are assessed on

the basis of revenues, unless they have information about revenues disaggregated by country.

For these reasons, the recent FASB changes to income tax reporting are complementary to, but not a

substitute for, a comprehensive CbCR rule that the Commission is best-placed to implement.20 The

Commission should address the information gaps that remain following FASB’s long overdue reforms,

and create a uniform public CbCR standard for U.S. issuers that meets investor needs for information and

adheres to international best practices.

ARGUMENT

1. The Commission has clear statutory authority to require improved tax disclosures

pursuant to the Securities Exchange Act of 1934.

The Securities Exchange Act of 1934 (“1934 Act”) grants broad discretion to the Commission to

promulgate regulations “as necessary or appropriate for the proper protection of investors” in sections

According to FASB, “Some investors provided feedback that additional jurisdictional information related to an

entity’s revenue, operating results, and income tax expense (or benefit) would allow for a more thorough

understanding of an entity’s business opportunities and exposures. ... [A]ddressing a broader request for

jurisdictional information would be beyond the scope of an income tax disclosure project and may significantly

delay the progress of the project.” Exposure Draft, FIN. ACCOUNTING STANDARDS BOARD (Mar. 2023), p. 24,

https://www.fasb.org/page/ShowPdf?path=Proposed%20Accounting%20Standards%20Update%E2%80%94Income

%20Taxes%20%28Topic%20740%29%E2%80%94Improvements%20to%20Income%20Tax%20Disclosures.pdf

As GRI explains, metrics like number of employees and revenues are all “indicators of the organization’s scale of

activity within a tax jurisdiction. When considered in conjunction with the other required and recommended

information, they can inform assessments about the level of taxes being paid in a jurisdiction.” GRI 207: Tax 2019,

GLOBAL REPORTING INITIATIVE (2019), pp. 11,

https://www.globalreporting.org/standards/media/2482/gri-207-tax-2019.pdf.

The Commission’s CbCR rule would not be duplicating FASB’s efforts, as the rate reconciliation required by

FASB provides specific detail that is omitted from CbCR reports. For this reason, the Commission should initiate a

rulemaking without waiting for FASB’s recent changes to take effect.

1100 13th Street NW, Suite 800 | Washington, DC | 20005 | USA

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Page 6 of 21

12(b) and 13(b).21 It is well established that this includes certain income tax disclosure requirements

pursuant to Regulation S-X. However, those requirements have not kept up with the expanded global

operations and aggressive international tax strategies of multinational companies, which present

increasing investor risks. As we explain below, the Commission has ample reason to conclude that the

updated tax disclosure sought in this petition is necessary and appropriate for the proper protection of

investors from material tax and other risks.22

Moreover, the Commission’s authority to address tax-related disclosures has been supported by Congress

from the very origins of the Commission up to the present day. Congress authorized the Commission to

consider tax-related disclosures when it first enacted the 1934 Act, explicitly listing protection of “the

Federal taxing power” as one of the Act’s legislative purposes in its preamble.23 More recently, members

of Congress have urged the Commission to implement public CbCR in the proposed “Disclosure of Tax

Havens and Offshoring Act.”24 This legislation, backed by investors representing nearly $3 trillion in

assets under management, passed the House of Representatives during the previous Congressional session

as part of a larger legislative package.25 The legislation would require the Commission, based on its

current authority, to require publicly-listed companies to engage in public CbCR.

2. This information is highly material to investors and will allow them to evaluate

significant and growing tax risks.

Investors are increasingly scrutinizing the tax practices of their portfolio companies, wary of

conspicuously low tax bills.26 This comes as no surprise given the significant financial stakes of

international corporate tax practices. Among the most common such practices is profit shifting. Also

known as transfer mispricing, profit shifting occurs when companies book profitable intangible assets

such as intellectual property offshore, which allows them to manipulate internal transfer prices between

domestic and foreign subsidiaries. As a result, companies can book their taxable income in tax havens

15 U.S.C. §§ 78(l)(b)(1)(A), (J), (K), (L); 78(m)(a)(1).

In addition to its obvious material tax relevance, CbCR information (particularly revenue and employee

headcount) is also relevant to material geopolitical risks, as in the example of Russia’s invasion of Ukraine, outlined

in FACT’s 2022 report, A Material Concern, Part II.C.

15 U.S.C. § 78(b).

S.638, 118th Cong. (2023).

House Takes Historic Step in Advancing Corporate Tax Transparency, THE FACT COALITION (Jun. 16, 2021),

https://thefactcoalition.org/house-takes-historic-step-in-advancing-corporate-tax-transparency.

Sheryl Tian Tong Lee, Asset Managers Are Quietly Purging Their Portfolios of Tax Risk, BLOOMBERG (March 3,

2024),

https://www.bloomberg.com/news/articles/2024-03-03/asset-managers-are-quietly-purging-their-portfolios-of-tax-ris

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with few or no meaningful local operations. Globally, companies shifted an estimated $1 trillion in profits

to tax havens in 2022.27 This profit shifting results in huge sums of unpaid taxes – according to

international tax experts, US multinationals may owe the IRS as much as $1 trillion from violations of

transfer pricing regulations over the years, and nearly half of that sum is attributable to just six large

companies.28 The financial impacts at the individual company level can reach into the billions, clearly

posing material risks for investors. Here are a few illustrative examples:

❖ Coca Cola is facing a potential tax liability of up to $16 billion in a transfer pricing case, which

exceeds the company’s $13.7 billion held in cash and short-term investments (as of December 31,

2023).29

❖ Amgen pharmaceutical company has been sued by one of its shareholders in a class-action suit,

where the shareholder accuses the company and certain top executives of failing to adequately

disclose its $10.7 billion tax dispute with the IRS over profit shifting to Puerto Rico, and that as a

result, the company’s share price fell by 6.5% on August 4, 2021 and 4.3% on April 28, 2022.30

Amgen is contesting the complaint and has moved to dismiss the case, which is pending as of this

writing.

❖ Microsoft has disclosed that the IRS had levied a record $28.9 billion in back taxes on the

company for 2004-2013 tax years.31 Taking into account penalties, independent tax experts

estimate that Microsoft’s total liability could balloon into a sum as high as $168.7 billion, more

than Microsoft’s 2022 and 2023 income combined ($145 billion).32

Annette Alstadsæter, Sarah Godar, Panayiotis Nicolaides, and Gabriel Zucman, Global Tax Evasion Report 2024,

EU TAX OBSERVATORY (2024), https://www.taxobservatory.eu/publication/global-tax-evasion-report-2024.

Reuven Avi-Yonah, et al, Commensurate with Income: IRS Nonenforcement Has Cost $1 Trillion, TAX NOTES FED.

(2023).

Coca-Cola Co., Annual Report (Form 10-K) (Feb. 20, 2024),

https://investors.coca-colacompany.com/filings-reports/annual-filings-10-k/content/0000021344-24-000009/000002

1344-24-000009.pdf. See also, Alex Martin, Does Coke Owe the IRS $10+ Billion for Transfer Pricing?, KBKG

(Mar. 22, 2022),

https://www.kbkg.com/tax-insight/tax-court-upholds-irs-3-billion-transfer-pricing-assessment-against-coca-cola.

Jonathan Stempel, Amgen is sued for concealing $10.7 billion tax bill from investors, REUTERS (Mar. 14, 2023),

https://www.reuters.com/legal/amgen-is-sued-concealing-107-billion-tax-bill-investors-2023-03-14.

Form 8-K, MICROSOFT CORPORATION (Oct. 11, 2023), https://microsoft.gcs-web.com/node/31951/html; see, Zorka

Milin, What the Microsoft Tax Case Shows Us About Tax Transparency, THE FACT COALITION (Nov. 8, 2023),

https://thefactcoalition.org/what-the-microsoft-tax-case-shows-us-about-tax-transparency.

Stephen L. Curtis & Reuven S. Avi-Yonah, Microsoft's Cost Sharing Arrangement: Frankenstein Strikes Again,

178 TAX NOTES FED. (Mar. 6, 2023).

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❖ Apple is facing a €14.3 billion tax assessment relating to transfer pricing arrangements which

were approved by the Irish government in violation of the EU prohibition against state aid,

according to the European Commission.33

Taken together, the examples above show that international tax practices indisputably pose significant

material financial risks for investors, and that such risks are not isolated, but are widespread across

different sectors. In each of these cases, if the company had published CbCR information for relevant

years, investors would have likely spotted red flags. But in the absence of such information, investors are

under-informed about companies’ tax risk exposure.

International corporate tax risks are not going away, but are likely to grow and intensify as a result of

several recent tax trends. First, the IRS is stepping up its tax enforcement, with a specific emphasis on

ensuring that large corporations pay the taxes they owe, among other priorities.34 Moreover, in recent

years, Congress has enacted a flurry of international corporate tax reforms.35 According to our rough

estimates, around one quarter of large US multinational companies have positive profits, yet effective tax

rates below 10 percent, which could expose them to additional US taxes or increased IRS scrutiny.36

Nevertheless, it is currently too difficult for investors to identify and evaluate specific tax risks facing

individual companies.

Furthermore, these domestic tax risks are compounded by multilateral tax reform efforts. Notably a global

plan under the auspices of the OECD includes a 15 percent global minimum corporate tax applied on a

country-by-country basis. Nearly one in three large US multinational companies, as well as many

US-listed foreign companies, are likely to experience additional taxes in countries that implement the

OECD’s global minimum tax (regardless of the implementation status of the US).37 Once again, it is too

difficult for investors to identify which companies are likely to be affected by this incipient standard

without public CbCR. For example, information about disaggregated employee headcounts might help

investors to assess how the OECD’s global minimum tax would apply in different countries, because

excess profits for purposes of the OECD’s global minimum tax exclude certain “substance-based income”

Javier Espinoza & Jude Webber, Apple dealt blow at top EU court over €14.3bn tax bill in Ireland, FINANCIAL

TIMES (Nov. 9, 2023).

IRS launches new initiatives using Inflation Reduction Act funding to ensure large corporations pay taxes owed,

INTERNAL REVENUE SERVICE (Oct. 20, 2023),

https://www.irs.gov/newsroom/irs-launches-new-initiatives-using-inflation-reduction-act-funding-to-ensure-large-co

rporations-pay-taxes-owed-continues-to-improve-service-and-modernize-technology-with-launch-of-business-tax-ac

count.

These reforms include: Global Intangible Low-Taxed Income (“GILTI”) and Base Erosion and Anti-Abuse Tax

(“BEAT”), both adopted as part of the 2017 tax cuts, and Corporate Alternative Minimum Tax (“CAMT”), which

was included in the 2022 Inflation Reduction Act. 26 U.S.C. § 951A; 26 U.S.C. § 59A; 26 U.S.C. § 55.

Material Concern, fig. 11, p. 27.

Id., fig. 3, p. 17.

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calculated by reference to payroll costs. In addition to the OECD, the United Nations is engaged in

ongoing negotiations to develop a new international framework convention on international tax

cooperation. Investors face further risk and uncertainty from unilateral measures, such as digital service

taxes (DSTs) that countries are increasingly imposing on locally-generated revenues. Without public

CbCR that includes revenues disaggregated by country, investors are left without a consistent means to

assess the expected impact of new DSTs and similar tax reforms.

All of these developments will impact large multinational issuers, but investors will remain in the dark

about these impacts unless the Commission acts promptly. As Professor Kimberly Clausing, former

Deputy Assistant Secretary for Tax Analysis in the United States Department of the Treasury, told the

Commission’s Investor Advisory Committee:

International tax avoidance, and the attendant policy responses of governments to this problem,

generates large effects on companies’ bottom lines that are often mysterious to public observers.

Yet markets work best in an environment where information is available, transparent, and free.

Better public data on multinational companies’ financial arrangements would serve the interests

of investors, who need to thoroughly understand the economic situations of companies and the

risks that they face.38

3. These disclosures are demanded by investors.

For more than a decade, investors have shown growing interest in companies’ international tax practices

and have been demanding more information about them, going back to 2011 investor calls for boards’ tax

risk assessments.39 A broad range of investors with more than $10 trillion in assets under

management have publicly supported CbCR, according to data compiled by Oxfam America.40

Securities and Exchange Commission Should Require Increased Tax Transparency for U.S.-Listed Multinationals,

FACT Coalition Tells Investor Committee, THE FACT COALITION (Dec. 8, 2022),

https://thefactcoalition.org/securities-and-exchange-commission-should-require-increased-tax-transparency-for-u-s-l

isted-multinationals-fact-coalition-tells-investor-committee.

See Alyce Lomax, In 2011, Shareholders Speak Louder Than Ever, MOTLEY FOOL (Jan. 26, 2011),

https://www.fool.com/investing/general/2011/01/26/in-2011-shareholders-speak-louder-than-ever.aspx (“Some tax

actions can eventually hurt shareholder returns, or increase a company's odds of restating its finances. Thus,

AFSCME is also asking for boards’ risk assessments on tax policies at a group of six companies, including retail

heavyweights Amazon.com (Nasdaq: AMZN) and Wal-Mart (NYSE: WMT).”). See also, Maddison Marriage,

Investor complacency over tax avoidance wanes, FIN. TIMES (Nov. 16, 2014),

https://www.ft.com/content/fe8e7fcc-6b2f-11e4-be68-00144feabdc0.

Methodological note and list of investors, OXFAM AMERICA (May 2023),

https://webassets.oxfamamerica.org/media/documents/10tril_AUM_Methodology_Note.pdf.

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Investors have encouraged the House of Representatives to pass the “Disclosure of Tax Havens and

Offshoring Act” and have consistently requested additional tax transparency from FASB.41 FASB Chair

Richard Jones said, “We heard repeatedly from investors it was a blind spot.”42 At the individual company

level, shareholders have filed a flurry of proposals calling for public CbCR in the last two years.

Amazon.com saw the first of its kind tax transparency proposal to go to a vote in 2022, after the

Commission sided with investors overseeing $3.6 trillion in assets to reject Amazon.com’s legal challenge

to the shareholder resolution.43 Since then, according to Morningstar Sustainalytics, “[a]cross 2022 and

2023, 10 tax-transparency-related shareholder proposals were filed at United States companies. Those

proposals were supported by 19.3% of shares voted on average and adjusting for insider control. This

House Takes Historic Step in Advancing Corporate Tax Transparency, THE FACT COALITION (Jun. 16, 2021),

https://thefactcoalition.org/house-takes-historic-step-in-advancing-corporate-tax-transparency and Investors Call on

Financial Accounting Standards Board to Prioritize Public Country-by-Country Tax Reporting, THE FACT

COALITION (Sep. 23, 2021),

https://thefactcoalition.org/investors-call-on-financial-accounting-standards-board-to-prioritize-public-country-by-co

untry-tax-reporting.

Nicola White, “Companies Must Reveal Tax Payments With New Accounting Rules”, BLOOMBERG LAW (Dec. 14,

2023),

https://news.bloomberglaw.com/financial-accounting/companies-must-reveal-tax-payments-with-new-accounting-ru

les

Emma Agyemang, Amazon under investor pressure over tax transparency, FINANCIAL TIMES (March 6 2022).

Securities & Exchange Comm’n, Amazon.com, Inc. No-Action Letter, (Apr. 5, 2022),

https://thefactcoalition.org/wp-content/uploads/2022/04/Amazon-Missionary-Oblates-1.pdf. Commission support for

the Amazon shareholder resolution marked a departure from the Commission’s previous position. Compare

Securities & Exchange Comm’n, Lazard Ltd. No-Action Letter (Feb. 16, 2011),

http://www.sec.gov/divisions/corpfin/cf-noaction/14a-8/2011/afscme021611-14a8.pdf. We acknowledge that staff in

the Commission’s Division of Corporate Finance recently granted no-action relief allowing Exxon to exclude a

similar shareholder proposal. Securities & Exchange Comm’n, Exxon No-Action Letter (Mar. 20, 2024),

https://www.sec.gov/files/oxfamexxon032024-14a8.pdf. In doing so, the staff apparently distinguished the previous

2022 Amazon decision by accepting Exxon’s argument that oil and gas companies have limited profit shifting

opportunities. This is not the case: transfer pricing is widespread in the oil and gas industry, as is evident from media

reporting and industry surveys. See, Tom Bergin & Ron Bousso, Special Report: How oil majors shift billions in

profits to island tax havens, REUTERS (Dec. 9, 2020); Robert DiNardo, Oil, gas companies see transfer pricing as key

tax issue: survey, S&P GLOBAL (Mar. 24, 2011),

https://www.spglobal.com/commodityinsights/en/market-insights/latest-news/natural-gas/032411-oil-gas-companies

-see-transfer-pricing-as-key-tax-issue-survey. Indeed, Exxon itself is currently engaged in a major US tax dispute

over its gas operations in Qatar. David Lee, ExxonMobil lays out $200 million case seeking tax refunds for Qatar

natural gas deal, COURTHOUSE NEWS (Apr. 15, 2024),

https://www.courthousenews.com/exxonmobil-lays-out-200-million-case-seeking-tax-refunds-for-qatar-natural-gasdeal. Exxon has also been accused of aggressive tax practices relating to its operations in Guyana. Olaf Geurts, Luc

Caregari, Maarten Bakker, How oil company ExxonMobil saves billions via Luxembourg, INVESTIGATIVE DESK (Feb.

3, 2024), https://investigativedesk.com/how-an-oil-company-saves-billions-thanks-to-luxembourg.

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Page 11 of 21

level of shareholder support is a significant result given the emerging nature of the issue.”44 Among vocal

supporters are major investors including Norway sovereign wealth fund Norges Bank Investment

Management45 and Federated Hermes EOS.46 (For a list of recent shareholder resolutions calling for

public CbCR, see Appendix, Table 1.) This rising tide of investor interest shows no signs of slowing

down.

4. Investors currently lack adequate tax information in issuers’ filed reports and other public

sources.

Tax disclosures that public issuers currently include in their filings – both in their financial statements and

in narrative descriptions of material risk considerations – fail to adequately inform investors about

material tax risks. The Commission’s current requirements fall far short of the leading global standard for

CbCR, GRI 207-4, which requires a country-by-country breakdown of key operating metrics, including

revenues, profits, taxes accrued and paid, tangible assets, activities, and employee headcounts. As the

item-by-item comparison in the table below shows, the disclosures currently required by the Commission

omit key data important to investors. For some items, issuers only provide a global aggregate; in other

cases, they lump together all of the foreign operations in a single bucket; and for others still, no

information is required to be reported at all. In the few instances where information is disaggregated, it is

only by “specific geographic area”, which typically means “continent”: a largely meaningless category for

purposes of tax risk analysis.

For a breakdown of the differences between the GRI 207-4 standard and disclosures currently required for

U.S. public filers, see Appendix, Table 2.

Mihnea Gheorghe & Andrew Spurr, Tax Risk Is Growing for Companies. Trouble Ahead for Cisco Systems,

Microsoft?, MORNINGSTAR (Dec. 1, 2023),

https://www.morningstar.com/sustainable-investing/tax-risk-is-growing-companies-trouble-ahead-cisco-systems-mic

rosoft.

Tax transparency is material to the fund’s investment decisions, and the fund has dropped several investments due

to lack of tax transparency. Gwladys Fouche, “For first time, Norway’s wealth fund ditches firms over tax

transparency,” REUTERS (Feb. 1, 2021),

https://www.reuters.com/world/europe/first-time-norways-wealth-fund-ditches-firms-over-tax-transparency-2021-02

-01. See also Responsible investment: Government Pension Fund Global (2023), p. 27,

https://www.nbim.no/contentassets/1a797e49fdd742e2a3282e243ed3170c/gpfg_responsible-investment-2023.pdf.

EOS at Federated Hermes, North America Vote Guidelines (2024), p. 10,

https://www.hermes-investment.com/uploads/2024/02/9518dafea4e95fec7e8e6866f55bacdf/fheos-regional-vote-gui

delines-noram-02-2024.pdf and UK, Europe & Australia Vote Guidelines (2024),

https://www.hermes-investment.com/uploads/2024/02/95bcd4f3a273540a1083de27085370ef/fheos-regional-vote-gu

idelines-euraus-02-2024.pdf. See also, Public Engagement Report (2022), p. 15,

https://www.hermes-investment.com/uploads/2022/10/3ed371015c173760657d97f153087f1c/eos-public-engagemen

t-report-q3-2022.pdf.

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Page 12 of 21

5. Some companies are voluntarily disclosing CbCR information, demonstrating that it

is feasible and beneficial.

We welcome the efforts by several issuers to provide CbCR disclosures on a voluntary basis. The number

of reporting companies has been steadily growing in recent years. A recent academic analysis of

voluntarily published country-by-country reports surveyed 35 multinational corporate groups, including

Shell, Vodafone, Lush, BHP, and Rio Tinto: in some cases, their reporting goes back for many years.47

The experience and perspective of these companies demonstrates that such disclosures are not only

feasible, but also seen as valuable by some issuers. A senior Shell executive testified before the European

Parliament in favor of additional tax transparency, noting that concerns around possible risks were not

borne out and were far outweighed by the benefits of transparency:

When we first started considering the report, we thought through all the possible risks, downsides

and unintended consequences. I can tell you now that in reality these concerns did not play out. In

fact, being more transparent has strengthened trust in Shell, and it continues to strengthen our

relationships with our customers, investors, policymakers, and others. I would encourage more

companies to open their books and show their financial contributions to society. Because meeting

society’s expectations will earn them trust… and because more transparency can support the

development of fair, stable and effective tax systems which are always important… but today

perhaps more than ever.48

All of these companies follow GRI 207-4, which is the disclosure standard that we are recommending the

Commission adopt. However, differences in companies’ level of voluntary adherence to the standard,49

the relatively small number of reporting companies and the fact that these reports are scattered and not in

a standardized format, all make these disclosures of limited use for investors in undertaking comparative

analysis. Standardized data can only be provided by the Commission mandating a broadly applicable

disclosure rule, which will level the playing field for issuers and make the information comparable for

investors.

For an example of a recent voluntary disclosure in line with GRI 207-4, see Appendix, Table 3.

6. The overall regulatory costs are minimal.

The compliance costs for public CbCR for most issuers would be minimal, given that they already collect

much of this information internally for business, payroll, and tax purposes. Beyond companies that

Sarah Godar, et al., The long way to tax transparency: lessons from the early publishers of country-by-country

reports. INT’L TAX PUB. FINANCE (2024), Table 7,

https://link.springer.com/article/10.1007/s10797-023-09818-5/tables/7

Alan McLean, Introductory Remarks by Alan McLean, Executive Vice President Taxation and Controller, Royal

Dutch Shell plc at the hearing by the FISC Committee of the European Parliament (Sep. 9, 2021),

https://www.europarl.europa.eu/cmsdata/239248/Alan%20McLean%20Statement.pdf.

A Material Concern, Appendix V.

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Page 13 of 21

already voluntarily report their CbCR information publicly, large United States multinationals with $850

million or more in revenue already have systems in place to collect and report similar information to the

IRS, on IRS Form 8975, in accordance with the OECD’s confidential CbCR framework. Since this IRS

reporting regime took effect in 2016, these US companies have been complying for several years without

any apparent issues. A CbCR rule issued by the Commission would impose negligible internal

compliance costs on those companies that are already complying with the IRS reporting.

Beyond collecting the relevant information, it does not require much additional effort to make it publicly

available to investors. The experience of companies that have been reporting their CbCR information

publicly for years confirms that public benefits outweigh the low costs. Relevant data includes European

banks and financial institutions that have been required to report under the EU Capital Requirements

Directive since 2014.50 Subsequent assessments of this reporting by the European Commission have

found that the CbCR requirements “were unlikely to have a significant negative economic impact: on the

contrary, the assessment highlighted positive consequences of CBCR on the transparency and

accountability of, and on the public confidence in, the financial services sector in the EU.”51 On costs, the

European Commission concluded:

the costs incurred by the institutions subject to the CBCR requirements ... are negligible:

expressed in terms of turnover, they are significantly below the one percentage point.

Furthermore, their amount decreases after the first year, once the reporting method is put in place.

It has also to be noted that, in the absence of the CBCR requirement, many institutions would

have incurred most of the administrative costs already e.g. for their business reporting, or

reporting to tax authorities pursuant to national laws implementing OECD action BEPS 13.52

Many more companies, including U.S. issuers, are expected to soon begin publishing some version of this

information. The EU has adopted a directive on public CbCR in November 2021, building on related

requirements already in place for the banking and extractive sectors.53 This directive will require reporting

from certain large multinational enterprises for reporting years beginning in summer 2024, and will

Article 89 of the Directive (EU) 2013/36 of the European Parliament and of the Council of 26 June 2013 on access

to the activity of credit institutions and the prudential supervision of credit institutions and investment firms,

amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC, OFFICIAL J. OF THE EUR.

UNION L 176/338 (Jun. 27, 2013),

https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32013L0036&from=EN.

Report from the Commission to the European Parliament and the Council: Assessment on the Adequacy of the

Information to be disclosed under Article 89(1) of Directive 2013/36/EU (Jun. 26, 2023),

https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX%3A52023DC0344.

Id.

Directive (EU) 2021/2101 of the European Parliament and of the Council of 24 November 2021 amending

Directive 2013/34/EU as regards disclosure of income tax information by certain undertakings and branches, 64

OFFICIAL J. OF THE EUR. UNION L 429/1 (Dec. 1, 2021),

https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=OJ:L:2021:429:FULL.

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Page 14 of 21

include a number of U.S. issuers. Meanwhile, Australia has introduced legislation that will require CbCR

in line with the GRI 207-4 standard for a number of high-risk jurisdictions from multinationals with

Australian tax residence or permanent establishment.54

If European and Australian regulators are ensuring that investors are informed about these risks, there is

no reason to continue to disadvantage investors in American capital markets. Any concerns that such

disclosures would somehow put reporting entities at a competitive disadvantage are false. The

information that would be disclosed is basic financial and operational information, without implicating

any trade secrets or other commercially sensitive information. Tax competition is not a beneficial form

of competition. In fact, due to increased levels of international scrutiny and enforcement, including at the

IRS as a result of recent funding increases, it is more likely than ever that companies which continue to

engage in secretive and risky tax practices will be at a long-term disadvantage, imposing unnecessary

risks and costs on their investors.

CONCLUSION

Ensuring that investors are properly informed about material risks is critical to each aspect of the

Commission’s three-part mission to protect investors; maintain fair, orderly, and efficient markets; and

facilitate capital formation. As multinational companies have increasingly used complex international tax

strategies shrouded in secrecy to pad their financial results, it is time for the Commission’s disclosure

framework to catch up. We urge the Commission to initiate a rulemaking to update Regulation S-X to

require issuers to provide CbCR information to their investors. Such a rule will bring enormous benefits

to investors, at minimal cost to companies.

If the Commission or the staff have any questions, or if we can be of assistance in any way, please contact

Zorka Milin at zmilin@thefactcoalition.org.

Sincerely,

ABP

Adrian Dominican Sisters, Portfolio Advisory Board

Aequo

AkademikerPension

Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Bill 2024, Parliament of

Australia, (June 5, 2024)

https://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/Bills_Search_Results/Result?bId=r7199.

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Page 15 of 21

American Federation of Labor and Congress of Industrial Organizations (AFL-CIO)

American Federation of State, County and Municipal Employees (AFSCME)

American Federation of Teachers (AFT)

Amiral Gestion

Australian Ethical Investment

Azzad Asset Management

Bâtirente

Boston Common Asset Management

Brunel Pension Partnership

Cardano

Church of England Pensions Board

Clean Yield Asset Management

Communications Workers of America

Congregation of Sisters of St. Agnes

Congregation of St. Joseph

CorpGov.net

Dana Investment Advisors

Daughters of Charity, Province of St. Louise

Domini Impact Investments, LLC

Dominican Sisters of Sparkill

DPAM - Degroof Petercam Asset Management SA

Ecofi

Ethical Partners Funds Management

Ethos Engagement Pool International

Ethos Engagement Services Clients

Ethos Foundation

Etica Funds - Responsible Investments

Everence and the Praxis Mutual Funds

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For the Long Term

French Sustainable Investment Forum (FIR)

Friends Fiduciary Corporation

Greater Manchester Pension Fund

Greenbank Investments

Harrington Investments, Inc.

Impax Asset Management

Interfaith Center on Corporate Responsibility

International Association of Machinists and Aerospace Workers

International Brotherhood of Electrical Workers (IBEW)

Investor Advocates for Social Justice

KLP

Lady Lawyer Foundation

Le Regroupement pour la Responsabilité Sociale des Entreprises (RRSE)

The Local Authority Pension Fund Forum

London LGPS CIV Limited

Maryknoll Sisters

Mercy Investment Services, Inc.

Miller/Howard Investments, Inc.

Mirova

Missionary Oblates

Natural Investments

NEI Investments

Nest Corporation

New York City Office of the Comptroller

Newground Social Investment

Nia Impact Capital

North America's Building Trade Unions (NABTU)

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NorthStar Asset Management

Oxfam America

PenSam

Predistribution Initiative (PDI)

Province of Saint Joseph of the Capuchin Order

Reynders, McVeigh Capital Management, LLC

Sampension

Sarasin & Partners LLP

School Sisters of Notre Dame Investment Fund

Service Employees International Union (SEIU)

Seventh Generation Interfaith Coalition for Responsible Investment

Sisters of Charity of Saint Elizabeth

Sisters of the Presentation of the BVM of Aberdeen, SD

Sisters of St. Francis of Philadelphia

SOC Investment Group

Socially Responsible Investment Coalition

Sustainable Advisors Alliance, LLC

Toniic

Trillium Asset Management

Trinity Health

U Ethical Investors

UFCW International Union

United Church Funds

United Steelworkers (USW)

Vision Super Pty Ltd

Zevin Asset Management

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Page 18 of 21

Appendix: Tables

Table 1. Shareholder proposals on CbCR to date (as of July 2024)

Source: Morningstar Sustainalytics and additional research by FACT

Company

Year

Title

Reported

Support

Adjusted Support55

Amazon

2022

Issue Alternative Tax

Report

17.5%

21.2%

2023

Issue Tax

Transparency Report

17.7%

21.4%

Brookfield Corp.

2023

Report on Tax

Transparency

27.0%

Chevron Corp.

2023

Report on Tax

Practices

Report on Tax

Practices

Issue Tax

Transparency Report

Issue Tax

Transparency Report

Report on Tax

Payments

14.6%

14.9%

26.9%

25.2%

17.3%

2024

Cisco Systems

2022

2023

ConocoPhillips

2023

ExxonMobil Corp.

2023

Issue Tax

Transparency Report

13.6%

Kosmos

2024

Tax Transparency

Report

23.2%

Microsoft Corp.

2022

Report on Tax

Transparency

Issue Tax

Transparency Report

23.0%

21.3%

2023

Adjusted support includes only votes by a company’s independent shareholders, excluding votes cast by insider

shareholders, such as company founders and executives.

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Table 2. Comparison of CbCR standard and current SEC disclosures

CbCR

requirements Currently required disclosure for public issuers

under GRI 207-4

Names of the resident

entities

Partial: only significant subsidiaries are required to be disclosed.56 As the

SEC’s own Investor Advisory Committee previously noted, “[d]isclosure

documents may not, therefore, provide a complete understanding of a

company’s structure and leaves open the possibility of undisclosed pockets

of meaningful firm-specific and systemic risk.”57

Primary activities of the

organization

Not reported by country.

Number of employees, No country-by-country breakdown, only a total “number of persons

and

the

basis of employed by the registrant” worldwide is required, despite increased focus

calculation

this on human capital management.58

number

Revenues

from

third-party sales, and

revenues

from

intra-group transactions

with

other

tax

jurisdictions

No: in most cases, intra-group transactions (often used for tax-dodging

purposes and that could create capital risks) are generally not visible as a

result of accounting guidance that removes most intercompany transactions

from GAAP financial statements for consolidated companies.59

17 C.F.R. § 229.601(b)(21).

Letter to the Commission Division of Corporation Finance, INVESTOR ADVISORY COMMITTEE (Jun. 15, 2016),

https://www.sec.gov/spotlight/investor-advisory-committee-2012/iac-approved-letter-reg-sk-comment-letter-062016.

pdf.

17 C.F.R. § 229.101(c)(ii)(2). See also, Petition to the Commission, THE HUMAN CAPITAL MANAGEMENT COALITION

(Jul. 6, 2017), https://www.sec.gov/files/rules/petitions/2017/petn4-711.pdf. As noted by the Human Capital

Management Coalition, “investors need high-quality quantitative and qualitative information that is relevant,

reliable, and effective in communicating how adeptly a company manages its human capital resources to drive

performance. Our request to the Commission is to ensure the information issuers report to investors accurately

reflects the markets as they exist, and as they evolve. We submit that a single data point on the number of employees

a firm directly employs tells us very little about the company’s ability to manage human capital risks and leverage

opportunities for growth and thus is no longer sufficient for a maturing market.”

ASC 810-10-45-1.

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Profit/loss before tax

Not disaggregated by country. All foreign operations can be lumped

together, because Regulation S-X only requires that income be separated in

two buckets: domestic and foreign.60

Tangible assets other Not disaggregated by country. In some cases, foreign assets may be

than cash and cash reportable in a “specific geographic area” that accounts for more than 10%

equivalents

(GRI of assets or revenue or pre-tax income or net income. Otherwise, they are

207-4.b.vii)

reported in aggregate.61

Corporate income tax Not generally required, except for certain resource extraction issuers.62

paid on a cash basis

Otherwise, even where cash taxes are reported, only an aggregate total is

given, without country-by-country breakdown.

A limited form of country-by-country breakdown for foreign taxes paid

will be required pursuant to recent FASB updates to its income tax

accounting standard, but only for countries that account for at least 5% of

the company’s total income tax paid. Unfortunately, because the threshold

was set as a percentage rather than a dollar figure, this will have the effect

of not capturing certain tax haven jurisdictions where tax transparency is

most needed.

Corporate income tax Not disaggregated by country. As with income, Regulation S-X only

accrued on profit/loss

requires accrued taxes to be separated in two buckets: domestic and

foreign.63

17 C.F.R. § 210.4-08(h)(1)

17 C.F.R § 210.9-05.

15 U.S.C. § 78m(q) and 17 C.F.R. § 240.13q–1.

17 C.F.R. § 210.4-08(h)(1)(i)-(ii). “Disclosure shall be made of…

(i) the components of income (loss) before income tax expense (benefit) as either domestic or foreign;

(ii) the components of income tax expense, including: (A) taxes currently payable and (B) the net tax effects, as

applicable, of timing differences (indicate separately the amount of the estimated tax effect of each of the various

types of timing differences, such as depreciation, warranty costs, etc., where the amount of each such tax effect

exceeds 5% of the amount computed by multiplying the income before tax by the applicable statutory Federal

income tax rate; other differences may be combined.)” (emphasis added). See also, 17 C.F.R § 210.4-08(h)(1) Note 1

(“Amounts applicable to United States Federal income taxes, to foreign income taxes and the other income taxes

shall be stated separately for each major component. Amounts applicable to foreign income (loss) and amounts

applicable to foreign or other income taxes which are less than five percent of the total of income before taxes or the

component of tax expense, respectively, need not be separately disclosed. For purposes of this rule, foreign income

(loss) is defined as income (loss) generated from a registrant’s foreign operations, i.e., operations that are located

outside of the registrant’s home country.”).

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Table 3. Sample country-by-country report from BHP (2022)64

Available at

https://www.bhp.com/-/media/documents/ourapproach/operatingwithintegrity/taxandtransparency/231221_countryb

ycountryreport2022.pdf

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This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.