The G7 Finance Ministers Tax Agreement It is a step on the way to a better global tax system. If we have come this far, it is because of pressure from citizens who have realized how broken the current system is. This is why the European Union is moving this week to publicly force big companies to do so Smashing their profits on a country-by-country basis Just as important as the G7 deal.
The good news is that country-by-country public reporting will now be extended to all major companies located or operating in the EU. Mass really requires it extractive companies (as the United States does) and Banks. This is welcome and long overdue.
The bad news is that the new rules are so full of holes that they put the sieves in a disgrace. The minimum revenue of 750 million euros required to report is very high; And companies have a lot of leeway to dodge the rules by claiming commercial sensitivity. Worst of all, companies only have to smash profits and taxes by an EU member state and a few listed tax havens – an invitation to regulatory arbitrage by pooling profits into channel entities in non-covered countries.
Some lobbyists argue that it is unnecessary to publish what the tax officer knows confidentially. But as the G7 deal shows, public disclosure of questionable tax maneuvers has created a political impetus for reform. global tax rules, the tax authorities for the resources properly and take legal action against the misuse.
What about the claim that more transparency makes European companies less competitive, presumably because they lose the bargaining advantage if the ranked profits are known to the public? Regardless of the unhealthy notion that European companies should pursue advantage by keeping their customers informed of bad deals, there are no proof This has occurred when the general reports are already applicable to individual countries.
I find these arguments very poor and I can only conclude that they are made in bad faith. In a few cases, perhaps they reflect a desire to continue playing the villain. In most cases, they are simply trying to defend a deeply entrenched position that one’s business is none other’s business—let alone all public business.
But the time has come for this worldview, because of the much larger change of which this limited progress in tax transparency is such a small part. We are experiencing a marked shift in what democratic societies expect of openness.
Corporate profits and taxes are far from the only example. Climate change is driving extraordinary pressures on companies to collect and disseminate data on the impact of their activities on the environment.
Until recently, this type of demand was restricted to investors with special reasons for interest – such as Norway’s sovereign wealth fund, which has a mandate to invest responsibly. right Now Investing based on preparedness for climate change It has become mainstream – with governments and the financial sector in a race over who will set the standards by which to measure such preparedness. In fact, G7 finance ministers are also calling for mandatory climate-related financial disclosures.
In another example, countries have started to report on companies Human rights in their supply chainAnd a common European Union rule is imminent. Everywhere you look, the trend of travel is toward what used to be seen as private business information being placed in the public domain, often by force of law.
And how could it be otherwise? The digital revolution has made it easier to find, share and process information: just look at Public Engagement with Data in the Covid-19 pandemic. This inevitably raises the expectation that where socially significant data exists, it should not be hidden. Citizens learn that the corporate sector stores data about them; They will demand to know at least a lot about what the companies intend to do. Whatever one thinks of unauthorized leaks, from WikiLeaks and Snowden’s pranks of government secrets to a series of overt tax haven activities, they reveal the futility of thinking that most institutional activities can be kept out of the public eye.
The dawning of an age in which most of what can be known will be known has begun. Resilient organizations will prepare for this future. This means identifying very narrow areas, such as personal privacy and true corporate and government secrets, where confidentiality is necessary with acceptance, even acceptance, that most information does not fall into this category. Successful companies will be those that can do their business in the open as well as in the dark.