I have already noted one campaign win today, but like buses these come along in groups these days. There were more wins from the plenary session of the EU parliament that adopted the report of the Panama Papers committee this week. I have relied for the following analysis on the report of the GUE / NGL summary of the hearing and admit I am focussing in particular on the issues where I had input as a result of the work I did for that group with Saila Stausholm on the Big 4 firms of accountants (Deloitte, EY, PWC and KPMG).
In the report Saila and I wrote we argued that:
In an era where transparency is seen as fundamental to accountability it is inappropriate for the world's leading auditors to be almost wholly opaque on their operations and to provide no effective reporting on their own activities when they play a fundamental role in the regulation of global capitalism. To counter the risk that these structures impose on society we suggest that firms organised in this way:
-
Should be defined as being under common control, and so are single entities for group accounting purposes within the European Union;
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Should be licenced as single entities for audit and taxation purposes throughout the European Union;
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Should be required in due course to separate entirely their audit and other professional services but until this is possible should be required to ringfence the two from each other worldwide as a condition of being licenced to provide such services in the EU;
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Should, as a condition of those licenses, be required to prepare worldwide group consolidated financial statements which must be published on public record;
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Should ensure that those consolidated financial statements include full public country-by-country reporting.
I think we were alone in bringing these issues to the Committee. In that case it is good to note that this was approved by the EU Parliament:
That the EU's existing definition of the control required to create a group of companies should be applied to accountancy firms that are members of a network of firms associated by legally enforceable contractual arrangements that provide for the sharing of a name or marketing, professional standards, clients, support services, finance or professional indemnity insurance arrangements, as anticipated by Directive 2013/34/EU on annual financial statements;
This is a quite explicit consequence of the comments on page 31 of our report and means our first and fourth recommendation have now been adopted.
It was also good to note that this was approved:
- Sanctions also to be applied to companies, banks, accountancy and law firms, and tax advisers proven to have been involved in illegal, harmful or wrongful activities with non-cooperative jurisdictions or proven to have facilitated illegal, harmful or wrongful corporate tax arrangements involving legal vehicles in those jurisdictions;
However, there were disappointments as well, including the rejection by the combined groups of which Labour and the Conservatives are members of:
- That professional networks .... should be required to file full country-by-country reports, adapted to meet the particular needs of the sector, on public record;
and
- Networks of professional service firms should be required to apply for a single licence to provide audit and taxation services of any sort in the Member States, and that all abusive tax schemes promoted by the firm that have an impact on the tax revenue of a Member State should be reported, whether sold in or outside the EU by a network member;
and
- All audit firms should be required to be entirely separate from those selling any other service;
However, the the first of these is inconsequential: they may well be caught under forthcoming EU rules on the preparation of country-by-country reporting if treated as single entities as approved by the plenary in any event. I stress, this is not binding, but it is progress. It also means that in effect we won our fifth recommendation anyway. That means we won three out of five: on the other two the cost is to society at large, I fear.
That said, I did not make progress on another issue, with regard to the Common Consolidated Corporate Tax Base where I have been arguing that without common accounting rules arbitrage will move from tax into accounting practice. This was rejected:
- As regards proceeding with the CCTB and CCCTB proposals, if aggregation were to take place without considering the differences between Member States' accounting rules the inconsistencies in the EU tax base might end up being exploited by those seeking to secure advantage from regulatory arbitrage; takes the view that, for this reason, ‘consolidated tax base' should mean the consolidated net taxable revenue of the corporate group members, as calculated on a consistent accounting basis applicable to all group members in accordance with Directive 2016/xx/EU;
That one will have to be fought on another day, but overall there was still progress. And that is what campaigning is about.
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Excellent news – both this and the previous. Well done 🙂 🙂
Thanks
And for my next trick…
(Only joking)
I think you shall have a small orange at Christmas.
(One of my father’s pet sayings – probably from his father before him in whose childhood it might not have been a joke)
In the modern idiom I think it equates to “the boy done good”
Thanks
I would say that you and the Tax Justice people have been just about the most successful campaigners in recent history;o)
There are academic studies suggesting this
Which is quite shocking, to be honest
We just set out to change things without any guarantee at z that we would
And no training in how to do it
Bur a lot of belief
Hearty congratulations to you Richard.
It has to be shared with many others I am pleased to say
my congratulations as well. And can we add some for the European Parliament for acting on this?
The Green
GUE / NGL
Some in S & D led by Paul Tang I would single out
You efforts deserve great praise, but I wondered which single proposal you thought most critical, and where you thought it now stood? For me it would be this: “[leading auditors] Should be required in due course to separate entirely their audit and other professional services but until this is possible should be required to ringfence the two from each other worldwide as a condition of being licenced to provide such services in the EU”. I was not quite clear how this now stood?
At the same time the test of all this will be, most of all, in terms of practical and rigorous application, above warm words or even general approval.
In any case, and not to seem grudging when you have achieved something positive; when you have a moment, and when you have the time (which I suspect you have much spare, needing to be filled [!]), could you apply the same critical analysis and effort to banking in the UK (only minor tinkering with the words you used above is required, from what I can see)?
John
The most important were kicked back, obviously….
Re banking – if there is time
Richard
Yes indeed – please pass on my gratitude to your fellow activists but I have to say that it is your clear headed thinking (as evidenced in the quality of your writing) that seems to me to be the intellectual turbo booster or ‘the heart’ of these campaigns.
In short, I am glad that you and your colleagues exist at all.
But look at it from my perspective – it’s the most fun at work I have ever had
“But look at it from my perspective — it’s the most fun at work I have ever had”
Really?
Yes, I guess it possibly is.
We do get into this mindset trap where we regard ‘work’ as drudgery. It shouldn’t be; and good on you for doing what keeps your creative juices flowing. Especially since it is socially valuable.
Yes – and when you say ‘fun’ – it is not that you don’t take it seriously it is I feel for you that you are doing something you are really interested in – you are leading quite an authentic life.
It also explains I think your admirable durability and steadfastness – especially when under fire. To keep going back into the fray you must enjoy the work.
I enjoy it
Intellectually it’s fun
But much more than that – the work is about changing things for the better
Having the chance to do that has been amazing
I’d love to achieve a lot more
I accept what is possible
But continually redefine what I think that is
The goal is always there as a result, still unattained, but worth going for
Richard, you are being too modest. It is your initiatives which took us to where we are today. It is a shame this is not more widely acknowledged. Why do you think that is?
Thanks
But the aim is change and not fame and I don’t really care about the acknowledgement unless it helps the next change
Would be interested to read a post some day about what motivates you; formative influences etc.
I’ll think about it
Sticky Buns?
Richard, Do you have an estimate of how much extra tax will be raised by these changes?
There will be critics out there saying that extra rules and regulations might get some excited but if there is no actual in what happens it’s all just a petty burocrat’s wet dream.
It would be good if you could put a number on the extra tax so we could shut these critics up.
This rule change is not about raising tax
It is about regulating a market that is out of control from society’s perspective