Supporting Statement
Tax transparency is increasingly important to investors. The PRI, representing investors with $89 trillion assets under management, states that, “For investors, tax risk is financially material at the individual asset level. With tightening regulations and shifting societal expectations, tax avoidance activities of multinational enterprises have attracted large fines and highlighted growing reputational, governance, and earnings risks.”1 96% of US companies expect more tax disputes as governments become more rigorous in tax examinations.2
In 2021, 136 countries signed a global tax reform framework.3 National and regional-level agreements also demonstrate growing consensus around the importance of tax disclosures: the proposed Disclosure of Tax Havens and Offshoring Act, passed by the House of Representatives, requires public country-by-country reporting (CbCR) of financial (including tax) data by SEC-registered companies.4 In November 2021, the European Union approved a directive to implement public CbCR for large multinationals operating there.5 In April 2023, the Australian government released draft legislation that requires CbCR for any large multinational doing business in Australia.6
Though a leader in other types of transparency, Kosmos does not disclose financial data with adequate levels of disaggregation to understand its operations and contextualize its tax and other payments by country.7 This challenges investors’ ability to evaluate the liability of tax reforms or whether Kosmos engages in responsible tax practices. This risks the company’s reputation and puts investors at risk of significant cost in tax challenges. For example, Kosmos is being challenged by the Ghana Revenue Authority for underpayment of certain taxes.8 While the company says that the claim lacks merit, investors do not have the data necessary to verify this.9
The GRI Standards are the world’s most utilized corporate reporting standard.10 The GRI Tax Standard - GRI 207 - is the first comprehensive, global standard for public tax disclosure. It includes four components. GRI 207-1, 207-2, and 207-3 require companies to disclose their approach to tax; their tax governance, control, and risk management; stakeholder engagement and management of tax concerns. 207-4 requires CbCR of financial information, including revenues, profits and losses, and tax payments within each jurisdiction.11 GRI 207 also recommends disclosing “industry-related and other taxes or payments to governments.”
A GRI-aligned tax transparency report would bring Kosmos in line with peer companies12 that report using GRI 207.13 Kosmos already reports CbCR information to OECD tax authorities privately, so any increased burden is negligible.
1 https://www.unpri.org/download?ac=15325#:~:text=Some%20investors%20believe%20that%20tax,good%20risk%20management%20and%20governance.&text=Prudent%20tax%20planning%20as%20the%20basis%20for%20tax%20management.
2 https://www2.deloitte.com/content/dam/Deloitte/global/Documents/Tax/gx-beps-global-survey-summary-results-2022.pdf
3 https://www.oecd.org/tax/international-community-strikes-a-ground-breaking-tax-deal-for-the-digital-age.htm
4 https://www.congress.gov/bill/117th-congress/house-bill/3007 5 https://www.internationaltaxreview.com/article/b1vf7yc65qpzcd/this-week-in-tax-eu-on-track-for-public-cbcr-by-2023
6 https://treasury.gov.au/consultation/c2023-383896
7 https://www.kosmosenergy.com/wp-content/uploads/2023/06/2022-Payments-to-Government.pdf; https://www.kosmosenergy.com/transparency/
8 https://investors.kosmosenergy.com/static-files/985f05d7-645f-4c32-a398-ca7fdc38e951, p. 45
9 https://ghstandard.com/goldfields-kosmos-dispute-tax-bills-imposed-by-gra/3319/
10 https://assets.kpmg/content/dam/kpmg/xx/pdf/2020/11/the-time-has-come.pdf
11 https://www.globalreporting.org/standards/media/2482/gri-207-tax-2019.pdf
12 https://www.hess.com/sustainability/how-we-operate/tax-practices; https://reports.shell.com/tax-contribution-report/2020/our-tax-data.html; https://s24.q4cdn.com/382246808/files/doc_downloads/2022/sustainability/newmont-2021-tax-report.pdf; https://www.bp.com/en/global/corporate/sustainability/our-approach-to-sustainability/tax-transparency.html; https://reports.shell.com/tax-contribution-report/2020/; https://www.eni.com/assets/documents/eng/reports/2020/Country-by-Country-2020_ENG.pdf; https://totalenergies.com/sites/g/files/nytnzq121/files/documents/2022-03/Tax_transparency_report_2019_2020.pdf
13 https://www.globalreporting.org/news/news-center/momentum-gathering-behind-public-country-by-country-tax-reporting/