SUBSCRIBE TO OUR FREE NEWSLETTER
Daily news & progressive opinion—funded by the people, not the corporations—delivered straight to your inbox.
5
#000000
#FFFFFF
5
#000000
#FFFFFF
Falling tax revenues mean less money for education, health, infrastructure, poverty reduction and climate change. (Photo: Michael Fleshman/flickr/cc)
Why Even Investment Funds Want More Corporate Tax Transparency
Multinational corporations must stop blocking further transparency so that governments can develop tax policies that address inequalities, as well as the populism and authoritarianism that flow from them
Apr 09, 2019
Who would dream of putting an end to the culture of secrecy, the opacity of multinational companies' accounts and the fortunes hidden in tax havens? The usual suspects, of course, tax justice activists - academics, churches, trade unions - angered by revelations such as the Panama Papers or Paradise papers. But not only: a recent report published by the Global Reporting Initiative (GRI) reveals that the most vocal advocates for tax transparency are... investment fund representatives. And we are not talking about small players: those in favour of voluntary corporate tax transparency reporting standards manage the equivalent of USD $10 trillion, about 12% of global annual GDP!
Investment fund managers know that the lack of tax transparency from multinationals often disguises underlying business failures. While it might help deliver executive bonuses, it exposes investors to unforeseen risks and may hide profits that should be returned as dividends. "Complex or opaque ownership and organisational structures hamper transparency and may compromise investors' fundamental financial analysis", said Norges Bank, one of the heavyweights in the sector, in a letter to the GRI.
Tax avoidance strategies, whether legal or not, have a high social and human cost that affects companies.
They also know that tax avoidance strategies, whether legal or not, have a high social and human cost that affects companies. Falling tax revenues mean less money for education, health, infrastructure, poverty reduction and climate change. And direct investment depends heavily on quality public infrastructure and a healthy and skilled workforce.
Since the 1980s, a powerful industry has developed out of sight in tax havens, where, according to the Tax Justice Network, USD $30 Trillion are currently hidden. That is more than double the GDP of the entire Eurozone economy, or over 150 times the annual amount estimated by economist Jeffrey Sachs required to end extreme poverty globally.
Deprived of funds crucial to their development, the countries in the global south are the biggest losers. But in terms of amounts, the most affected are the United States and European countries, where most of the multinational companies' workforce and consumers are located. The EU, for example, loses about 20% of its corporate tax revenue to tax havens, the equivalent, according to economist Gabriel Zucman ofhalf of public spending on higher education.
Last month, the International Monetary Fund (IMF) President, Christine Lagarde, said in a widely reported op-ed that "the ease with which multinationals seem able to avoid tax and the three-decade-long decline in corporate tax rates compromise faith in the fairness of the international system." In other words, it is toxic for democracy.
The funding gap created by tax dodgers must be paid for with higher contributions from the middle and working classes, making it much more difficult for these groups to save or accumulate wealth.
This is because the funding gap created by tax dodgers must be paid for with higher contributions from the middle and working classes, making it much more difficult for these groups to save or accumulate wealth. The richest one per cent now have more wealth than the rest of the world combined, as recently shown by Oxfam.
Facing public anger, the G20 and the Organization for Economic Cooperation and Development (OECD) have pushed for increased sharing between tax authorities, including country-by-country reporting on the profits and tax payments of the largest multinationals. Unfortunately, this norm will only apply to very large multinationals and their reports will not be publicly available, depriving all of us of a key resource in the fight for tax justice.
We are not told how much money is stashed away in tax havens, how much our governments know about it or what they are doing to fight against it, if anything. Worst of all, these exchanges rely on financial institutions, which are precisely the ones that help their clients hide their money.
As Lagarde argues, the rules of the global tax system need to be rewritten. But a democratic debate is impossible when key information is withheld from the public.
Yet corporations continue to resist even voluntary standards. Their main arguments are that the public might be confused by the information and that producing it would be a burden. Are we expected to believe that massive multinationals cannot produce tax reports containing information that any prudent corporation should already be collecting?
Multinational corporations must stop blocking further transparency so that governments can develop tax policies that address inequalities, as well as the populism and authoritarianism that flow from them. It is also an imperative for growth, since political instability deters companies from investing. Transparency is today our only chance to restore confidence in our democratic institutions, and even, quite simply, to preserve them.
An Urgent Message From Our Co-Founder
Dear Common Dreams reader, It’s been nearly 30 years since I co-founded Common Dreams with my late wife, Lina Newhouser. We had the radical notion that journalism should serve the public good, not corporate profits. It was clear to us from the outset what it would take to build such a project. No paid advertisements. No corporate sponsors. No millionaire publisher telling us what to think or do. Many people said we wouldn't last a year, but we proved those doubters wrong. Together with a tremendous team of journalists and dedicated staff, we built an independent media outlet free from the constraints of profits and corporate control. Our mission has always been simple: To inform. To inspire. To ignite change for the common good. Building Common Dreams was not easy. Our survival was never guaranteed. When you take on the most powerful forces—Wall Street greed, fossil fuel industry destruction, Big Tech lobbyists, and uber-rich oligarchs who have spent billions upon billions rigging the economy and democracy in their favor—the only bulwark you have is supporters who believe in your work. But here’s the urgent message from me today. It's never been this bad out there. And it's never been this hard to keep us going. At the very moment Common Dreams is most needed, the threats we face are intensifying. We need your support now more than ever. We don't accept corporate advertising and never will. We don't have a paywall because we don't think people should be blocked from critical news based on their ability to pay. Everything we do is funded by the donations of readers like you. When everyone does the little they can afford, we are strong. But if that support retreats or dries up, so do we. Will you donate now to make sure Common Dreams not only survives but thrives? —Craig Brown, Co-founder |
Our work is licensed under Creative Commons (CC BY-NC-ND 3.0). Feel free to republish and share widely.
Daniel Bertossa
Daniel Bertossa is the Assistant General Secretary of Public Services International (PSI) a Global Union Federation representing 20 million public service workers in 160 countries, and Co-Chair of the Board of the Independent Commission for the Reform of International Corporate Taxation (ICRICT).
Who would dream of putting an end to the culture of secrecy, the opacity of multinational companies' accounts and the fortunes hidden in tax havens? The usual suspects, of course, tax justice activists - academics, churches, trade unions - angered by revelations such as the Panama Papers or Paradise papers. But not only: a recent report published by the Global Reporting Initiative (GRI) reveals that the most vocal advocates for tax transparency are... investment fund representatives. And we are not talking about small players: those in favour of voluntary corporate tax transparency reporting standards manage the equivalent of USD $10 trillion, about 12% of global annual GDP!
Investment fund managers know that the lack of tax transparency from multinationals often disguises underlying business failures. While it might help deliver executive bonuses, it exposes investors to unforeseen risks and may hide profits that should be returned as dividends. "Complex or opaque ownership and organisational structures hamper transparency and may compromise investors' fundamental financial analysis", said Norges Bank, one of the heavyweights in the sector, in a letter to the GRI.
Tax avoidance strategies, whether legal or not, have a high social and human cost that affects companies.
They also know that tax avoidance strategies, whether legal or not, have a high social and human cost that affects companies. Falling tax revenues mean less money for education, health, infrastructure, poverty reduction and climate change. And direct investment depends heavily on quality public infrastructure and a healthy and skilled workforce.
Since the 1980s, a powerful industry has developed out of sight in tax havens, where, according to the Tax Justice Network, USD $30 Trillion are currently hidden. That is more than double the GDP of the entire Eurozone economy, or over 150 times the annual amount estimated by economist Jeffrey Sachs required to end extreme poverty globally.
Deprived of funds crucial to their development, the countries in the global south are the biggest losers. But in terms of amounts, the most affected are the United States and European countries, where most of the multinational companies' workforce and consumers are located. The EU, for example, loses about 20% of its corporate tax revenue to tax havens, the equivalent, according to economist Gabriel Zucman ofhalf of public spending on higher education.
Last month, the International Monetary Fund (IMF) President, Christine Lagarde, said in a widely reported op-ed that "the ease with which multinationals seem able to avoid tax and the three-decade-long decline in corporate tax rates compromise faith in the fairness of the international system." In other words, it is toxic for democracy.
The funding gap created by tax dodgers must be paid for with higher contributions from the middle and working classes, making it much more difficult for these groups to save or accumulate wealth.
This is because the funding gap created by tax dodgers must be paid for with higher contributions from the middle and working classes, making it much more difficult for these groups to save or accumulate wealth. The richest one per cent now have more wealth than the rest of the world combined, as recently shown by Oxfam.
Facing public anger, the G20 and the Organization for Economic Cooperation and Development (OECD) have pushed for increased sharing between tax authorities, including country-by-country reporting on the profits and tax payments of the largest multinationals. Unfortunately, this norm will only apply to very large multinationals and their reports will not be publicly available, depriving all of us of a key resource in the fight for tax justice.
We are not told how much money is stashed away in tax havens, how much our governments know about it or what they are doing to fight against it, if anything. Worst of all, these exchanges rely on financial institutions, which are precisely the ones that help their clients hide their money.
As Lagarde argues, the rules of the global tax system need to be rewritten. But a democratic debate is impossible when key information is withheld from the public.
Yet corporations continue to resist even voluntary standards. Their main arguments are that the public might be confused by the information and that producing it would be a burden. Are we expected to believe that massive multinationals cannot produce tax reports containing information that any prudent corporation should already be collecting?
Multinational corporations must stop blocking further transparency so that governments can develop tax policies that address inequalities, as well as the populism and authoritarianism that flow from them. It is also an imperative for growth, since political instability deters companies from investing. Transparency is today our only chance to restore confidence in our democratic institutions, and even, quite simply, to preserve them.
Daniel Bertossa
Daniel Bertossa is the Assistant General Secretary of Public Services International (PSI) a Global Union Federation representing 20 million public service workers in 160 countries, and Co-Chair of the Board of the Independent Commission for the Reform of International Corporate Taxation (ICRICT).
Who would dream of putting an end to the culture of secrecy, the opacity of multinational companies' accounts and the fortunes hidden in tax havens? The usual suspects, of course, tax justice activists - academics, churches, trade unions - angered by revelations such as the Panama Papers or Paradise papers. But not only: a recent report published by the Global Reporting Initiative (GRI) reveals that the most vocal advocates for tax transparency are... investment fund representatives. And we are not talking about small players: those in favour of voluntary corporate tax transparency reporting standards manage the equivalent of USD $10 trillion, about 12% of global annual GDP!
Investment fund managers know that the lack of tax transparency from multinationals often disguises underlying business failures. While it might help deliver executive bonuses, it exposes investors to unforeseen risks and may hide profits that should be returned as dividends. "Complex or opaque ownership and organisational structures hamper transparency and may compromise investors' fundamental financial analysis", said Norges Bank, one of the heavyweights in the sector, in a letter to the GRI.
Tax avoidance strategies, whether legal or not, have a high social and human cost that affects companies.
They also know that tax avoidance strategies, whether legal or not, have a high social and human cost that affects companies. Falling tax revenues mean less money for education, health, infrastructure, poverty reduction and climate change. And direct investment depends heavily on quality public infrastructure and a healthy and skilled workforce.
Since the 1980s, a powerful industry has developed out of sight in tax havens, where, according to the Tax Justice Network, USD $30 Trillion are currently hidden. That is more than double the GDP of the entire Eurozone economy, or over 150 times the annual amount estimated by economist Jeffrey Sachs required to end extreme poverty globally.
Deprived of funds crucial to their development, the countries in the global south are the biggest losers. But in terms of amounts, the most affected are the United States and European countries, where most of the multinational companies' workforce and consumers are located. The EU, for example, loses about 20% of its corporate tax revenue to tax havens, the equivalent, according to economist Gabriel Zucman ofhalf of public spending on higher education.
Last month, the International Monetary Fund (IMF) President, Christine Lagarde, said in a widely reported op-ed that "the ease with which multinationals seem able to avoid tax and the three-decade-long decline in corporate tax rates compromise faith in the fairness of the international system." In other words, it is toxic for democracy.
The funding gap created by tax dodgers must be paid for with higher contributions from the middle and working classes, making it much more difficult for these groups to save or accumulate wealth.
This is because the funding gap created by tax dodgers must be paid for with higher contributions from the middle and working classes, making it much more difficult for these groups to save or accumulate wealth. The richest one per cent now have more wealth than the rest of the world combined, as recently shown by Oxfam.
Facing public anger, the G20 and the Organization for Economic Cooperation and Development (OECD) have pushed for increased sharing between tax authorities, including country-by-country reporting on the profits and tax payments of the largest multinationals. Unfortunately, this norm will only apply to very large multinationals and their reports will not be publicly available, depriving all of us of a key resource in the fight for tax justice.
We are not told how much money is stashed away in tax havens, how much our governments know about it or what they are doing to fight against it, if anything. Worst of all, these exchanges rely on financial institutions, which are precisely the ones that help their clients hide their money.
As Lagarde argues, the rules of the global tax system need to be rewritten. But a democratic debate is impossible when key information is withheld from the public.
Yet corporations continue to resist even voluntary standards. Their main arguments are that the public might be confused by the information and that producing it would be a burden. Are we expected to believe that massive multinationals cannot produce tax reports containing information that any prudent corporation should already be collecting?
Multinational corporations must stop blocking further transparency so that governments can develop tax policies that address inequalities, as well as the populism and authoritarianism that flow from them. It is also an imperative for growth, since political instability deters companies from investing. Transparency is today our only chance to restore confidence in our democratic institutions, and even, quite simply, to preserve them.
We've had enough. The 1% own and operate the corporate media. They are doing everything they can to defend the status quo, squash dissent and protect the wealthy and the powerful. The Common Dreams media model is different. We cover the news that matters to the 99%. Our mission? To inform. To inspire. To ignite change for the common good. How? Nonprofit. Independent. Reader-supported. Free to read. Free to republish. Free to share. With no advertising. No paywalls. No selling of your data. Thousands of small donations fund our newsroom and allow us to continue publishing. Can you chip in? We can't do it without you. Thank you.