Tackling tax havens: country-by-country reporting

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It's often said that tax havens are a part of life and there's nothing we can do about them. That's not true, as a new series on the Tax Justice Network's Tackle Tax Havens web site shows.

Take as an example, one of my favourite topics, which is the fact we simply can't find out what multinational corporations do in any particular country in which they trade. As Tackle Tax Havens puts it, suppose a U.S. multinational corporation mines natural resources in Africa and sells them in the United States and Europe and it sets up a complex array of subsidiary companies, each with a different name, in tax havens across the world to do this.

In that case that corporation could shift billions in profits to those tax haven subsidiaries, avoiding tax in countries with stronger tax regimes in the process.

When it publishes its annual report, the multinational rolls up all the information from each country — trading, profits, tax payments and so on — into one big lump.

No-one — governments, the public, even investors and shareholders — knows what happened where in that case.

With this piece of accounting trickery, a huge black hole has been created in corporate accounts that the use of tax havens makes doubly impenetrable because no accounts can ever be obtained from those places.

Then enter Country by Country Reporting!

Under country by country reporting, the multinationals would have to break their information down by country of operation — including in each tax haven — so that citizens and authorities can see what the corporations are doing in their countries.

With this single accounting measure, countries, rich and poor, will be able to call multinational companies to account at last.

Countries could tax the companies properly. They could fund the schools, roads and hospitals their citizens need, without having to beg for aid.

That makes country by country reporting a blast of transparency that could change the world.

There's more on country-by-country reporting here.