Tax transparency and paying taxes as a part of responsible business behaviour
In the beginning of November, the International Consortium of Investigative Journalists (ICIJ) revealed links between tax havens and more than 120 politicians and world leaders, over 100 multinational corporations and a large group of wealthy individuals. The disclosure, called the Paradise Documents, includes 13.4 million documents originating mainly from company Appleby, operating in a tax haven and from business registers of many tax havens.
Past disclosures have made it clear that tax avoidance through tax havens presents systemic abuse, and not just individual cases. Unfortunately, as long as there are loopholes in the laws that allow it, there would be companies and individuals who would exploit these holes. The consequences are already felt throughout the world - in rising economic and social inequalities and rising tensions. This is a global problem that cannot be completely solved at the national level, and that is why governments should make a global agreement to halt such tax practices.
One part of solution would be to give public access to the data of multinational companies on where they operate and how much taxes they pay in each country where they operate (i.e., country-by-country reporting).
Paying tax is part of the social responsibility of any organisation. Businesses benefit from infrastructure, security, education, health and social peace, they use resources, so paying taxes is elementary to be able to maintain the services that make business possible at all.
Companies, claiming that corporate social responsibility is important for them, have been revealed as avoiding the complex system in avoiding paying their fair share of taxes. For example, Apple shifted much of its offshore wealth from Ireland to a tax haven in the British Isles. Apple secretly moved parts of empire to Jersey after row over tax affairs. Rearrangement allowed tech firm to keep paying ultra-low tax rate when Ireland tightened rules
Another example is Nike – money paid for trainers in shops moved in and out of Europe, to Caribbean and even to entities not officially based anywhere.
The EU institutions are making a note of the situation too: in the European parliament draft recommendation to The council and the Commission (dated on 7.11.2017), the Parliament “stresses that carrying out a responsible tax strategy is to be considered a pillar of Corporate Social Responsibility (CSR) and that tax evasion, tax avoidance and aggressive tax planning practices are incompatible with CSR; reiterates its call on the Commission to include this element in an updated Corporate Social Responsibility EU Strategy”.
Author: Petra Hartman (Ekvilib Institute)