Insights

Addressing Corporate Tax Avoidance

One of the most important areas of corporate social responsibility has gone largely ignored, until now. The headlines are filled with stories of aggressive strategies by corporations to minimize or eliminate their tax payments, primarily through the use of offshore tax havens. Countries around the world are losing billions in tax revenues, all in the name of shareholder value.

Tax avoidance weakens societies and threatens long-term wealth creation. That is why Domini is taking a lead role in asking corporations to adopt more responsible and transparent tax strategies.

Tax is an investment in society. What is our return on investment? Corporations and investors depend upon government services funded by tax revenues, including law enforcement, market regulation, judicial systems, infrastructure maintenance, public education, poverty alleviation, environmental protection and national defense. These indispensable services can only be funded by tax revenues.

Economist Joseph Stiglitz warns that corporate tax avoidance threatens the wellspring of “future innovation and growth.” Companies like Google and Apple have benefited from taxpayer-funded scientific research.

Investors need to speak up, and end this global race to the bottom. At Domini, we are asking companies to adopt ethical principles to guide their tax strategies, considering their impact on society and brand value, just as they have with bribery, child labor and climate change.

Quick Facts on Corporate Tax Avoidance
Corporate profits are booked in places like Bermuda to avoid paying taxes where those profits were actually earned. How do we know? In 2010, the amount that American companies told the IRS they actually earned in Bermuda was 1,643% of that country’s entire yearly economic output.*
At least 362 companies (72% of the Fortune 500), operate subsidiaries in tax haven jurisdictions as of 2013.*
When corporations don’t pay their taxes, somebody else needs to pick up the tab. In 1952, 32% of U.S. federal tax revenues came from corporate income tax. By 2012, this portion had shrunk to only 8.9%. (Source: Congressional Research Service)

*Source: Offshore Shell Games 2014 (U.S. PIRG Education Fund and Citizens for Tax Justice)

Investors may only just be waking up to this critical issue. Our first of its kind proposal, asking Google to adopt a set of ethical principles to guide its tax strategies, went to a vote at the company’s annual meeting in May. Although we received a very low vote, nearly 20% of investors abstained, telling us that many investors are undecided. In the meantime, our proposal helped to raise awareness, and led to our first conversation with Google about its tax strategies, a dialogue that we hope will continue.


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The Domini Funds are not insured and are subject to market risks, such as sector concentration and style risk. Investing internationally involves special risks, such as currency fluctuations, social and economic instability, differing securities regulations and accounting standards, limited public information, possible changes in taxation, and periods of illiquidity. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. You may lose money. This information is provided for educational purposes only, and should not be considered investment advice with respect to any of the holdings listed.


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Domini Impact Investments LLC (Domini) is the Funds’ investment manager. The Funds are subadvised by unaffiliated entities.

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