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Tax Transparency

Multinational companies do not publicly report on where they are making their money or what taxes they are paying to whom.  Investors, policymakers, and citizens have no idea exactly how they are gaming the system—what they tell us versus what they tell other countries.  They should have to write it down in one place and report it on a country-by-country basis, so that the public, policymakers, and shareholders can see what they are really paying.

Muddled Markets

Investors are at an increasing risk due to the lack of information disclosed by companies about their tax practices, according to this November 2018 report published by the Financial Accountability and Corporate Transparency Coalition (FACT Coalition). Titled “Muddled Markets: Investors Increasingly at Risk from Lack of Disclosures about Corporate Tax Practices,” the report finds that multinational companies have become increasingly reliant on offshore tax avoidance practices to boost short-term earnings in recent years, yet disclosure requirements haven’t kept pace with this changing world.

As governments around the globe struggle with growing budget deficits, tax authorities are increasingly cracking down on aggressive tax avoidance practices, which can have a significant impact on shareholder value. At the same time, shifting national policies around international taxation — including, but not limited to, the recent tax overhaul in the United States — create complexity and uncertainties with respect to returns for investors.

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Tax Transparency Fights Tax Avoidance

Justice Brandeis once famously said that “sunlight is the best disinfectant.”  It is a quote advocates for government and corporate transparency have repeated each time we are asked if any of “this stuff” makes a difference.  For the record, it does.

The latest evidence comes from a recent report produced by two German academics looking at whether a European Union (EU) tax transparency initiative had any measurable impact on corporate behavior.

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‘Financial Exposure’ Showcases Tax Misconduct by Powerful Individuals and Corporations

The story of tireless congressional staff uncovering brazen misdeeds by powerful individuals and corporations in Elise J. Bean’s Financial Exposure has an anchoring quality in the context of rampant scandal that has come to characterize today’s politics. Bean’s account reiterates the point that tax avoidance and tax evasion were endemic to our financial system long before allegations against a sitting president brought them to the forefront of the public consciousness.

While the Permanent Subcommittee on Investigations (PSI) is an investigative body rather than a policymaking one, the inquiries into abusive tax shelters, secretive banking practices, and corporate tax avoidance that Bean describes illustrate some of the central policy problems plaguing the American tax system.

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Investors and Academics Push SEC to Require Tax Transparency, Other ESG Disclosures

WASHINGTON, D.C. — More than 60 institutional investors and academics called on regulators Tuesday to require more transparency in corporate filings — including information on offshore tax practices.  The petition to the Securities and Exchange Commission (SEC) is part of a broader effort to align disclosure frameworks with an investment environment focused on long-termism.

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Revealing Big Pharma’s tax dodging: The story behind the numbers

Critics may argue the data we base our calculations on is incomplete, the methodology with which we calculate tax loss figures simplistic. And they are right.

Our tax loss estimates are rough because corporate secrecy limited our access to data. We analyzed information for only a small subset of the dozens of countries in which pharma corporations operate, and only a subset of their subsidiaries in those countries. The data we found is just the tip of the iceberg, especially for developing countries.

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