A new era of corporate transparency is coming

This G7 Finance Minister’s Tax Agreement It is a step towards a better global tax system. If we get to this point, it is because of the pressure of citizens, who have realized how broken the current system is.This is why the EU took action this week to force big companies to make public Break down their profits country by country As important as the G7 agreement.

The good news is that public country reports will now be extended to all the largest companies headquartered or operating in the EU.The group has requested it Mining company (Same as the United States) and bank. This is welcome, and it should have been long ago.

The bad news is that the new rules are full of loopholes, dwarfing the sieve. The 750 million euro revenue threshold required to report is too high; companies have too much leeway to circumvent the rules by claiming commercial sensitivity. Worst of all, companies only need to split profits and taxes by EU member states and a few listed tax havens—regulatory arbitrage by aggregating the profits of pipeline entities in countries not covered.

Some lobbyists believe that there is no need to make the secret information of tax officials public.However, as the G7 agreement showed that the public’s exposure to suspicious taxation operations has generated political motivation to solve the problem Global tax rules, The resource tax authority handles properly and punishes abuse of power in accordance with the law.

The argument that greater transparency will reduce the competitiveness of European companies is said to be because they will lose their bargaining advantage if the disaggregated profits are made public. So what?Leaving aside the unhealthy notion that European companies should seek advantage by keeping customers ignorant of obtaining bad deals, there is No evidence This has already happened where public country reports have been applied.

I found these arguments to be very bad, and I can only conclude that they are motivated by malice. In a few cases, they may reflect a desire to persist in fouling. In most cases, they are just trying to defend a deep-rooted attitude that their own affairs have nothing to do with others—especially all public affairs.

However, the time for this worldview has come, because the limited progress in tax transparency is only a small part of it. We are experiencing a significant shift in democratic society’s expectations of openness.

Corporate profits and taxes are far from the only examples. Climate change has put tremendous pressure on companies to collect and publish data on the environmental impact of their activities.

Until recently, this demand was limited to investors who had special reasons to pay attention to—for example, Norway’s sovereign wealth fund, whose mission was to invest responsibly.right now Investment prepared based on climate change Has become mainstream-the government and the financial industry are vying for who will define the standard to measure this degree of readiness. In fact, the G7 finance ministers also called for mandatory disclosure of climate-related financial information.

In another example, countries began to let companies report Human rights in the supply chain, The EU common rules are imminent. It can be seen everywhere that the direction of dissemination is private business information that was considered to be placed in the public domain in the past, usually subject to legal constraints.

How else is it possible? The digital revolution has made it easier to find, share and process information: just look at the public’s participation in data during the Covid-19 pandemic. This inevitably raises the expectation that if socially important data exists, it should not be hidden. Citizens are learning that the corporate sector is hoarding data on them; they will demand at least as much as possible about what the company is doing. No matter how people view unauthorized leaks, from WikiLeaks and Snowden leaking government secrets to a series of exposed tax haven activities, they all reveal that the idea that most institutional activities can be kept out of the public eye is futile.

An era is approaching, and most things that can be known will be known. Resilient institutions will prepare for this future. This means delineating very narrow areas, such as personal privacy and real company and government secrets, where confidentiality is required, while accepting or even accepting that most information does not fall into this category. Successful companies will be those that can conduct business both in the open and in the dark.

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About the Author: Agnes Zang