Daniel Bertossa

Corporate tax secrecy is hurting everyone - even investment funds want to see more transparency

Falling tax revenues mean less money for education, infrastructure and poverty reduction. The lack of transparency at multinationals and their tax avoidance strategies are threatening democracy, and they must be made more accountable

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Tech giant Apple has found a tax haven in the island of Jersey, according to the Paradise Papers. Photo: AP

Daniel Bertossa

Published: 2:00pm, 10 Apr 2019Updated: 10:30pm, 10 Apr 2019

Who would dream of putting an end to the culture of secrecy shielding multinational companies’ account books and fortunes hidden in tax havens? There are the usual suspects, of course: tax activists including academics, churches and trade unions, who are up in arms over revelations from the likes of the Panama Papers or Paradise Papers.

But not only them. A recent consultation exercise by the Global Reporting Initiative reveals that the strongest advocates of tax transparency may be investment funds – and not the small players. The investment organisations in favour of a global tax standard represent an estimated US$10 trillion, about 12 per cent of global GDP.

Investment fund managers know the lack of tax transparency at multinationals often obscures underlying business failures. While it might help deliver executive bonuses, it exposes investors to unforeseen risks and may hide profits that should be returned as dividends. “Complex or opaque ownership and organisational structures hamper transparency and may compromise investors’ fundamental financial analysis,” Norges Bank Investment Management, one of the biggest players, has said.

They also know tax avoidance strategies, whether legal or not, come with high social and human costs. Falling tax revenues mean less money for education, health, infrastructure, poverty reduction and climate change. And direct investment depends heavily on quality public infrastructure and a healthy, skilled workforce.

Since the 1980s, a powerful industry has developed in tax havens where, according to the Tax Justice Network, around US$30 trillion is hidden. That is more than double the gross domestic product of the entire euro zone, or more than 150 times the annual amount that economist Jeffrey Sachs estimates is required to end extreme poverty worldwide.