The Tax Transparency Efforts Push Full Steam Ahead…
By Robert Stewart
Tax justice advocates, investors, and the public at large have long pushed for tax transparency—ensuring that tax and other financial information about corporations—is released to the public. In this era of extreme inequality, the demand that corporations pay their fair share of taxes continues to grow. According to a poll by Pew, nearly 60% of Americans say that they are bothered “a lot” by corporations not paying their fair share and an additional 22% say this bothers them “some.” And, reporting about the many profitable US corporations that paid nothing in taxes last year substantiates the public’s concern. Some companies are able to avoid paying taxes because the current tax code makes it easier for multinational corporations to avoid taxes through using accounting maneuvers to shift profits and book revenues to subsidiaries incorporated in tax havens. The only way to ensure corporations are paying their fair share is to disclose companies’ pertinent tax information to the public and investors.
A report from our coalition partners at the FACT (Financial Accountability and Corporate Transparency) Coalition found that investors are increasingly facing risks due to corporations’ secretive tax practices and lack of disclosure. Furthermore, the report found that multinational companies have become more dependent on offshore tax avoidance practices to enhance short-term earnings in recent years, which puts our global economy at risk. As a result, to garner momentum for tax transparency and disclosures, over 66 investors with $2.9 trillion in assets under management completed a sign on letter sending a clear message to Congress to pass the Disclosure of Tax Havens and Offshoring Act. This bill would require corporations to publicly disclose not only taxes paid to all the countries the company operates in, but other important financial indicators such as: a list of subsidiaries, main activity, revenue, profit, number of employees, stated capital, accumulated earnings, and tangible assets on a country-by-country basis. These disclosures are essential in order to restore public trust in our tax code, increase the stability of our markets and equip investors with the tools needed to make informed fiduciary decisions. Thankfully, after years of advocacy from Public Citizen and our FACT Coalition partners, the House of Representatives recently passed the Disclosure of Tax Havens and Offshoring Act.
This recent action by the House in support of tax transparency builds on the growing momentum for increased tax disclosures on the international front. For example, the Global Reporting Initiative, which is a global standard setter for both the business and government communities, introduced the first globally applicable public reporting standard for that embraces tax transparency and mandates public country-by-country reporting which went into effect in January of this year. And, in June, the European Union also made significant progress toward tax transparency by introducing a country-by-country reporting directive.
Domestically, Public Citizen and other advocacy groups have submitted public comment to the Securities and Exchange Commission (SEC) advocating for rulemaking for tax transparency mandating public country-by-country reporting as a part of broader ESG (environment, social and governance) disclosures. However, while this public comment opportunity from the SEC shows great promise, Congress has the power to ensure that the SEC does in fact move forward with requiring companies to make these disclosures. So, while the House of Representatives has demonstrated significant leadership with the passage of the Disclosure of Tax Havens and Offshoring Act, we need the Senate to do its part in passing this bill to ensure that tax public country-by-country tax reporting becomes the standard in this nation once and for all! Join the fight !