SEC rules against Amazon in dispute with investors over tax transparency

Amazon investors who want the tech giant to provide greater tax disclosures have been handed a victory after the US Securities and Exchange Commission supported their demand for a shareholder vote on the issue.

The development represents one of the first times the regulator has granted a shareholder request on tax matters. It points to a growing shift in investor attitudes, with how multinationals manage their tax burdens being increasingly seen as a crucial governance issue.

Amazon, which has attracted criticism over its tax transparency in the past, had challenged the shareholder request brought late last year. Its lawyers had urged the SEC to exclude the issue from a vote at its AGM in May, arguing that tax was an ordinary business matter and therefore subject to a shareholder resolution exemption.

However, on Tuesday the SEC wrote to Amazon, rejecting its claims.

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“We are unable to concur in your view that the company may exclude the proposal,” said the regulator in a letter seen by the Financial Times. “In our view, the proposal transcends ordinary business matters.”

Investor expectations

Katie Hepworth, responsible tax lead at shareholder advisory group Pirc, which has been coordinating the resolution, argued that Amazon had shown itself to be “out of step with investor and regulator expectations on corporate tax practices”.

She added: “Globally, there is growing government and investor momentum to reform the global taxation system so that it is fit for purpose and will ensure that companies fairly contribute to the revenue of the countries in which they operate and earn profit.

“These developments in global tax reform will increase risks for companies operating at the limits of the law. Investor understanding of a company’s relative risk profile and appetite is hampered by a lack of transparency.”

Amazon does not at present publicly disclose its revenues, profits or tax payments on a country-by-country basis outside the US.

It has previously 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 [SEC]”.

It has also said it “has publicly reported on its total tax contributions in the United States as well as the United Kingdom, Italy, France, and Spain”.

The shareholder resolution, which will now be allowed to go to a vote at Amazon’s AGM on May 25th, calls on the company’s board to issue a tax transparency report to shareholders, “at reasonable expense and excluding confidential information”.

The investors have demanded this be done in accordance with the Global Reporting Initiative’s (GRI) tax standard. The model requires companies to make a public disclosure of their business activities, revenues, profit and tax paid in each country they operate in.

The resolution was originally filed by the Missionary Oblates of Mary Immaculate, a Catholic investment fund and the Greater Manchester Pension Fund. It has been publicly backed by at least 24 institutional investors in Amazon. They include asset managers Nordea and Royal London as well as several large European and US pension funds, who collectively oversee assets of about $1.2 trillion (€1.2 trillion).

In March, investors signed a letter alongside dozens of other investor groups, with total assets under management of $3.6 trillion, petitioning the SEC to allow the issue to come to a vote. Signatories included several ESG-focused and religious funds, although not all of these invest in Amazon.

Amazon did not immediately respond to a request for comment. - Copyright The Financial Times Limited 2022