Sunlight, they say, is the best disinfectant. This is perhaps nowhere more so than when it comes to the fight for tax justice. If we want to be confident that large multinational companies are paying their fair share of tax, then we are going to need a lot more transparency than we have at the moment.
In the last few weeks, we’ve seen a number of developments relating to tax transparency – some good, and some less so.
Let’s start with the positive. At the end of January, the civil servants in the European Commission published their ‘Anti-Tax Avoidance Package’. This was a response to, among other things, a report I co-authored at the end of last year and which was passed overwhelmingly by the European Parliament in December.
A major element of this package was a new requirement for companies across the EU to report exactly where they make their profits, and where they pay their taxes. This is a welcome step – it means that we are getting closer to a situation where we can guarantee that companies pay their taxes in the places where they make their profits.
At the same time, the Commission has also agreed to let MEPs have access to some 5,500 confidential tax-related documents that had previously been off-limits. These documents all related to meetings of something called the Code of Conduct on Business Taxation Group, where members of EU governments would meet to discuss tax matters in order to make sure that no one country’s tax policies would undermine another’s.
In its early days, and under former Labour Minister Dawn Primarolo, this Group had been very effective – with a number of potentially harmful tax policies stopped in their tracks. Over time, though, the Group became more and more toothless and more and more secretive.
Taken together, these new developments are therefore very encouraging. However, they still don’t go far enough, and in fact are at risk of being undermined.
For a start, the Commission stopped short of requiring companies to make their ‘country by country reports’ completely public, something I called for in my report last year. They also only want the requirement to apply to companies which make over £500m a year, meaning that the new rules will only cover about 10% of EU companies. What’s worse, when EU Finance Ministers met earlier this week, they proposed to water the rules down even further – saying that information wouldn’t need to be reported if there was any risk to “commercial confidentiality” at all.
That same group of Finance Ministers also postponed the process of reforming the Code of Conduct Group – a process that is supposed to lead to it becoming more effective and more transparent. Their proposals for reform fall well short of what is needed.
We cannot continue with such a ‘one step forward, two steps back’ approach to achieving tax justice. It’s been 18 months since the ‘Lux Leaks’ scandal, and people have known for a lot longer than that that something has been rotten in the state of large companies’ tax affairs. Ordinary people across Europe are crying out for change, and their governments cannot keep ducking the hard choices needed to make that change.
That’s why I am calling on the civil servants in the Commission to come forward with proposals, as soon as they can, to make multinational companies report their tax arrangements to the public as a whole. And why I’m calling on national governments, including David Cameron’s Conservatives, to stop resisting the moves towards more transparency and start embracing them. It’s time to let some sunlight in.