Call for pension funds to weigh investment risk of complex corporate tax planning

Pension funds should be weighing up the investment risk of complex corporate tax planning in light of the approval by G20 countries of the OECD Base Erosion and Profit Shifting (BEPS) Action Plan requiring automatic exchange of tax information by the end of 2015 in a bid to deter cross-border tax evasion, according to the world’s largest trade union federation.
The call, made by the International Trade Union Confederation (ITUC), comes as unions are stepping up their pressure on investor signatories to the United Nations-supported Principles for Responsible Investment (PRI) to show their commitment to responsible investment outcomes.
ITUC said pension funds had a moral and fiduciary duty to respond to the tax issue: “Fair and appropriate tax payments and management of tax risks must be incorporated as part of responsible investment policies. Tax is not an external cost to be avoided but a legitimate payment that helps create sustainable long-term value.”

The changes to international tax information exchange were approved by G20 countries at the meeting of finance ministers in Cairns, Australia on September 20/21. It comes as the European Commission has launched a formal investigation into a 16-year so-called ‘sweetheart’ tax arrangement between Apple and the Irish government.In a separate move, Unison, the UK’s biggest trade union, has written to the PRI and held talks with the giant California Public Employees Retirement System (CalPERS) to enlist support for a campaign targeting Bridgepoint Capital, the private equity owner of Care UK, the health and social care company, to push it to pay employees a so-called ‘living wage’ of £7.65 (€9.82) an hour.
Bridgepoint, which has raised more than €12bn from investors including public and private pension funds, is a signatory to the PRI.
A number of UK local authority pension funds are understood to be engaging with Bridgepoint on the issue after employee strikes. The living wage campaign in the UK has already resulted in a number of companies being hit with public boycotts.
Unison says Care UK will not negotiate directly with it. A spokesman for Care UK told the Independent newspaper that Unison had not responded to its own pay proposals nor a call to arbitration with Acas, the labour dispute conciliation service.
A spokesman for Bridgepoint told the paper: “Bridgepoint aims to ensure that a fair wage is paid to all employees across the businesses it invests in that is competitive within each company’s sector.”