Tax-avoidance could backfire on companies
Firms which find ways to dodge paying tax are facing a PR disaster which could hit their shares.
Tax has become the latest battleground for ethical investors, but their message sends out a warning to anyone who invests in shares.
Investors are demanding that funds stop supporting companies that use tax-dodging schemes. By doing so, campaigners claim, firms take cash away from hospitals, schools and other public services, particularly in poor countries.
But the issue is not just about the moral imperative, warned Mark Robertson of the responsible investment research service Eiris.
"Tax avoidance also creates real financial risks for investors," he said. "There's compliance risk, which can stem from complicated and costly disputes. But there's also the significant reputational damage in the form of negative publicity arising from aggressive tax evasion or avoidance.
"As a consequence investors should look at tax avoidance from a risk management perspective, irrespective of their own opinions or ethical stance on the issue."
For example, Vodafone has come under heavy criticism in the UK about its tax payments. Meanwhile the commodities giant Glencore, which is holding its first AGM in May, has also been accused of tax-dodging in Zambia, one of the world's poorest countries, although the firm denies the accusations.
In the last few days there has been widespread criticism of the online retailer Amazon after it was revealed that UK tax authorities were investigating the firm. Questions have been raised about why it paid no corporation tax on sales of more than £3bn and whether it avoided tax by allocating sales to a Luxembourg firm.
"When companies dodge their taxes, it hits hospitals, schools and other public services – and the millions of people who need them," pointed out Joe Stead, senior economic justice adviser at the charity Christian Aid.
"In poor countries especially, tax-dodging costs lives – and for some ethical investors, that matters. They want the companies they invest in to thrive, but they want the same thing for the societies where they operate."
While the charity is keen to publicise the negative effects of a major company attempting to avoid tax, the charity also pointed to the financial grounds for avoiding the firms.
"Becoming known as a tax dodger can damage a company's reputation and lead to costly penalties being imposed by governments," said Mr Stead, pointing to Barclays' recent run-in with the UK government.
To date, there are few ethical funds that have taken on board investors' concerns about tax-dodging companies. But that is likely to change, according to Mark Robertson.
"The issue of corporate tax avoidance is of increasing concern to consumers, and this will likely lead more investors to look at it alongside all the other sustainability issues they consider when investing.
"Few UK ethical funds have specific investment policies to address tax avoidance, but this will change as governments and the public step- up their pressure on companies to tackle the issue."
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
- 1 Nigel Farage: Me vs Russell Brand on Question Time – he's got the chest hair but where are his ideas?
- 2 Harry Potter fans can apply to the Hogwarts-inspired College of Wizardry
- 3 Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
- 4 Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
- 5 Orange Wednesdays are no more
Disgruntled RBS worker writes hilarious open letter to Russell Brand after anti-capitalist publicity stunt leaves him hungry
Shock poll shows voters believe Ukip is to the left of the Tories
Nigel Farage's approval rating hits 'record low' as popularity suffers in wake of Ukip sex scandal
Nigel Farage defends Kerry Smith 'ch***y' comment: 'If you are going for a Chinese, what do you say you’re going for?'
Ukip candidate jokes about 'shooting peasants' in racist and homophobic rant
Pakistan school attack live: Taliban kill at least 132 children in 'horrifying' massacre
iJobs Money & Business
$200 - $350 per annum: Carlton Senior Appointments: Managing Producer Office...
$125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...
Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...
Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...
Day In a Page
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens