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The G7 Tax agreement of finance ministers it is a step towards a better global tax system. If we get this far, it’s because of pressure from citizens who have realized how broken the current system is. That’s why the move by the EU this week to publicly force large corporations distribute their profits to each country It’s as important as the G7 deal.
The good news is that public reports in each country will now be disseminated to the largest companies based or operating in the EU. The block is already asking for that extraction companies (Like the US) and banks. It is welcome and long overdue.
The bad news is that the new rules are full of holes to embarrass the sieves. The revenue limit of 750 million euros for the report is very high; and companies are given too many opportunities to circumvent the rules by claiming trade sensitivity. Worst of all, companies have to distribute profits and taxes according to EU member states and some listed tax havens – an invitation to regulatory arbitrage, summing up profits in pipeline entities in uncovered countries.
Some lobbies argue that it is not necessary to make public what the taxpayer knows in secret. But public display of questionable tax maneuvers on G7 deal sparks political push for solution global tax rules, to properly enforce the resource tax authority and take legal action against abuse.
What happens when greater transparency makes European companies more competitive because they are supposed to lose their trading advantages if the distributed profits are publicly known? Aside from the unhealthy idea that corporate Europe should seek an advantage by keeping customers in the dark about getting bad deals, there is no evidence this has happened in places where public reports for each country are already applied.
I think these arguments are very poor, I can conclude that they are made in bad faith. In some cases, they probably reflect a desire to continue with bad play. For the most part, they try to defend a entrenched attitude that one’s business is not someone else’s account, at least the public’s.
But the time has come to achieve this worldview, because this limited progress in tax transparency is a much larger change that is a small part of it. We are experiencing a marked change in what democratic societies expect in terms of openness.
Corporate profits and taxes are far from the only example. Climate change puts extra pressure on companies to collect and publish data on the impact of their activities on the environment.
Until recently, this type of request was only for investors who had special reasons to care, such as the Norwegian Wealth Sovereign Wealth Fund, which is mandated to invest responsibly. Now investments based on climate change preparedness it has become dominant, with governments and the financial industry, in a race that will define measures to measure who will prepare for this race. In particular, G7 finance ministers are calling for mandatory climate-related appearances.
In another example, countries have started reporting companies human rights in the supply chain, and is close to the ordinary EU rule. Everywhere you look today, the tide of protectionist sentiment is flowing.
And how else could it be? The digital revolution has made finding, sharing, and processing information much easier: see people’s engagement with the data in the Covid-19 pandemic. This inevitably creates hope that, if data of social importance exists, the hope that it should not be hidden. Citizens are learning that the corporate sector stores data about them; companies will require you to know at least as much about what they do. Anything you think about unauthorized leaks, from government secret dumps to WikiLeaks and Snowden to a chain of tax haven activity, reveals the futility of thinking that most institutional activities can be kept in public.
It is illuminating the era in which most of the known will be known. Resilient organizations will be prepared for this future. This means defining very narrow areas, such as personal privacy and real corporate and government secrets, by accepting confidentiality when most information is not in that category, even embracing it. They will be successful companies that can do their business as openly as they can.
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