Liberal Group Wants SEC to Boost Disclosure Rules on Tax Avoidance

The liberal group Americans for Tax Fairness on Friday called on the Securities and Exchange Commission to bolster its disclosure rules to require publicly listed companies to reveal the outcomes of offshore tax avoidance strategies.

Frank Clemente, ATF’s executive director, wrote in a comment letter that the agency needs to update Regulation S-K to require companies to disclose all of their subsidiaries, along with a range of information about those subsidiaries’ profits, losses, and effective tax rates on a country-by-country basis.

“Any reasonable investors would want to know this information especially when tax liability plays such a prominent role in a company’s overall financial health,” Clemente wrote. “Further, aside from the direct impact, there is (sic) significant reputational risks companies engaged in offshore tax avoidance or evasion, which may indirectly impact the finances of U.S. issuers.”

Clemente’s letter, which came in response to a comment request on the SEC’s proposed updates to the disclosure regulation, went through several specific examples of how tax avoidance strategies had adverse impacts on investors. The SEC has fielded critical comments on the regulation from business groups like the U.S. Chamber of Commerce.

Earlier this week, a chamber official warned the agency against requiring disclosures on issues unrelated to its mandate of regulating capital markets.

“It is clear that the SEC’s current standard for subsidiary disclosure is inadequate based on ATF’s studies and that of numerous other organizations,” said Tom Quaadman, senior vice president at its Center for Capital Markets Competitiveness.

Briefings

Finance Brief: Week in Review & What’s Ahead

President Donald Trump signed three executive actions affecting the financial services industry. The actions included two presidential memorandums — one directing the Treasury Department to examine the Dodd-Frank process for winding down failing banks, and another directing the agency to review the Financial Stability Oversight Council’s authority to designate firms systemically important. The third item was an executive order directing the Treasury Department to analyze tax rules adopted in the last 18 months and identify any regulations deemed convoluted or onerous.

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