Sunday, 17 April 2016

Transparency of ownership and taxation

I’ve been very busy lately with my day job and doing teaching preparation but I’ve been trying to follow the #panamapapers information and commentary as best I can.

I have only managed to tweet a few things about it but I wanted to outline how I think there should be hugely more transparency about who owns what around the world, but a few limits on this.  

Transparency of company ownership

The system of property ownership is a human institution and should be organised in a fair way. The only way to know if it is fair is to know who owns what and to be sure that everyone is paying as much tax on it as they should. This is never going to be a perfect system – criminals and corrupt officials will always find ways to launder their ill-gotten gains. However, the system should be such that it is made difficult for them to do so and that there is a chance they will be caught out later on.

Many of the resources in the world are owned by corporate enterprises, which is perfectly understandable. Corporations go about the business of producing the goods and services that we all need and want.

But who owns the companies? Companies exist to benefit their ultimate owners, which is again perfectly fine. However, this means that the benefits are going to one or a mixture of the following:
·         Individuals (or family units) – could be sole-owners, partners, shareholders or workers with a stake in the company.
·         Governments
·         Sovereign wealth funds for the benefit of future generations within a country
·         Non-governmental Organisations (non-profit organisations)

The ultimate beneficial owners of corporate entities should be public information. The same should apply to trusts.

Transparency of personal tax records

After the Panamanian revelations politicians in the UK have been reluctantly releasing their tax records in order to prove that they are not receiving funds that undermine their credibility.

Some people are now suggesting that the UK should follow a Scandinavian model whereby tax records are publicly available.

I am in favour of greater transparency of personal tax records but not making full records available as politicians have been. The limited records I would suggest is simply gross income and tax paid in the last year and gross income and tax paid in their lifetime.

My suggestion is that there should be a website in which anyone can find out certain headline information about the taxpayers at
·         Any given address (but without specific names, so it would just list taxpayer 1, taxpayer 2 etc.)
·       The information for any given individual if three or more can be provided to anyone with the following pieces of information can be entered:
First Name
Address/Post code
Date of Birth
Tax number (National Insurance number in the UK)

This means that journalists or the public could find out information about well-known people as their date of births. 

Are there downsides to this transparency?

Public figures might feel forced to give further information to show where they got their income from. This might be intrusive, but on the other hand it seems important if people have disproportionately more cultural or political power in a society that the public is aware of their financial situation.

Self-employed people might not be happy that their competitors and clients can find out their income and possibly gain an advantage in negotiations as a result. However, I’ve said headline summary figures should be provided about companies and individuals so this wouldn’t necessarily tell you everything required in order to draw absolute conclusions.

Could it put people in danger?

The following groups could be in danger, but I will suggest ways around this:
·         Spies
But these could presumably be designated civil servants and self-employed business people as they no doubt already are to some degree to cover their identities.
·         Political refugees
Could be given new legal identities or have their addresses supressed under UN orders.
·         People whose lives are threatened (for example people who have stalkers/subject to religious persecution and fatwa’s/ in witness relocation)
Could also receive special protection on their information.

Overall, I think the benefits of greater transparency outweigh the downsides, but I'm keen to hear if there are any strong arguments I haven't considered.