At least 12 heads of state and government, numerous other politicians, as well as many stars in sports and entertainment: all have allegedly channelled billions of dollars of dodged taxes through one single firm in Panama to avoid tax. But this affair is just a snapshot of an ever-growing scandal of individuals and companies using tax havens to avoid paying their fair share of tax. It’s a dirty, dodgy scandal and a form of corruption that’s furthering extreme inequality and poverty, everywhere.
Adapted for the UK from a blog by Aurore Chardonnet, Oxfam’s EU tax policy advisor
Just like LuxLeaks, SwissLeaks or OffshoreLeaks, PanamaPapers confirms once again how a well-organised tax-dodging industry makes wealth and profits disappear in tax havens. This is a problem for all of us, because it means states are lacking the resources for essential services like education and health.
One of the most important prerequisites for a successful fight against tax dodging is tax transparency. We have to ensure that companies disclose where they make their profits and where they pay their taxes. Right now, companies aren’t legally required to publicly declare where they do business and where they pay taxes. That means citizens in rich and poor countries alike don’t have access to information about what companies are up to in their own countries. Instead, we rely on scandals like #PanamaPapers to get hold of such information – which is just the tip of the iceberg.
Last year nearly 5,000 Oxfam supporters emailed George Osborne asking him to champion this kind of reporting; and last Tuesday, the European Commission tabled a proposal for transparency rules.
But the proposal doesn’t provide the level of transparency needed to put a stop to tax avoidance. In the proposal, companies are only required to publicly report their dealings in EU member states, and an as yet undetermined EU list of tax havens – firms would not need to report their business relations with companies in other places which may be used to avoid taxes. Also, developing countries will be left in the complete dark on big companies’ operations on their territories. Another severe deficit is the scope of the draft: only 10 to 15% of all multinational firms would
actually be required to publish country-by-country reports.
Such transparency rules, better known as public country-by-country reporting, should require multinational companies to disclose a breakdown of the profits they earned, taxes owed and taxes paid, as well as an overview of their economic activity in every country where they have subsidiaries (that includes offshore jurisdictions). If the European Commission seriously wants to tackle tax avoidance, then the new transparency rules need to apply to all big companies operating in Europe, and provide a breakdown for all countries, including all tax havens and developing countries.
Transparency is the only way to avoid relying on massive leaks like Panama Papers to shed light on financial secrecy and tax abuse.
Ahead of next month’s Anti-Corruption Summit, the Prime Minister must announce that he supports reforms of these proposals to ensure they represent a meaningful attempt to tackle tax dodging. Furthermore, at next month’s Anti-Corruption Summit, the Prime Minister can ensure real progress by calling for public country by country reporting on a global basis.
Take action – email your MP:
If the Prime Minister is serious about tackling corruption, he needs to make tax dodging a top priority when world leaders meet at the international Anti-Corruption Summit in London.
Photo credit: George Osborne (Creative commons licensed photograph.)
Photo: altogetherfool / Flickr