Investment fund managers know that the lack of tax transparency from multinationals often disguises 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.


Who would dream of putting an end to the culture of secrecy, the opacity of multinational companies’ accounts and the fortunes hidden in tax havens? The usual suspects, of course, tax justice activists – academics, churches, trade unions – angered by revelations such as the Panama Papers or Paradise Papers. But not only those: a recent report published by the Global Reporting Initiative (GRI) reveals that the most vocal advocates for tax transparency are… investment fund representatives. And we are not talking about small players: those in favour of voluntary corporate tax transparency reporting standards manage the equivalent of US$10 trillion, about 12 per cent of global annual GDP!

Investment fund managers know that the lack of tax transparency from multinationals often disguises 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”, said Norges Bank, one of the heavyweights in the sector, in a letter to the GRI.

They also know that tax avoidance strategies, whether legal or not, have a high social and human cost that affects companies. 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 and skilled workforce.

Since the 1980s, a powerful industry has developed out of sight in tax havens, where, according to the Tax Justice Network, US$30 trillion are currently hidden. That is more than double the GDP of the entire Eurozone economy, or over 150 times the annual amount estimated by economist Jeffrey Sachs required to end extreme poverty globally.

Deprived of funds crucial to their development, the countries in the global south are the biggest losers. In Nigeria, the potential loss of revenue to the government is approximately $2.2 billion a year, according to a recent Global Financial Integrity study. To put this figure in context, this amount represents four per cent of total annual government revenue.

Last month, the International Monetary Fund (IMF) president, Christine Lagarde, said in a widely reported op-ed that “the ease with which multinationals seem able to avoid tax and the three-decade-long decline in corporate tax rates compromise faith in the fairness of the international system.” In other words, it is toxic for democracy.

Multinational corporations must stop blocking further transparency so that governments can develop tax policies that address inequalities, as well as the populism and authoritarianism that flow from them. It is also an imperative for growth, since political instability deters companies from investing.


This is because the funding gap created by tax dodgers must be paid for with higher contributions from the middle and working classes, making it much more difficult for these groups to save or accumulate wealth. The richest one per cent now have more wealth than the rest of the world combined, as recently shown by Oxfam.

Facing public anger, the G20 and the Organisation for Economic Cooperation and Development (OECD) have pushed for increased sharing between tax authorities, including country-by-country reporting on the profits and tax payments of the largest multinationals. Unfortunately, this norm will only apply to very large multinationals and their reports will not be publicly available, depriving all of us of a key resource in the fight for tax justice.

We are not told how much money is stashed away in tax havens, how much our governments know about it or what they are doing to fight against it, if anything. Worst of all, these exchanges rely on financial institutions, which are precisely the ones that help their clients hide their money.

As Lagarde argues, the rules of the global tax system need to be rewritten. But a democratic debate is impossible when key information is withheld from the public.

Yet corporations continue to resist even voluntary standards. Their main arguments are that the public might be confused by the information and that producing it would be a burden. Are we expected to believe that massive multinationals cannot produce tax reports containing information that any prudent corporation should already be collecting?

Multinational corporations must stop blocking further transparency so that governments can develop tax policies that address inequalities, as well as the populism and authoritarianism that flow from them. It is also an imperative for growth, since political instability deters companies from investing. Transparency is today our only chance of restoring confidence in our democratic institutions, and even, quite simply, preserving them.

Daniel Bertossa is the Assistant General Secretary of Public Services International (PSI) and Co-Chair of the Board of the Independent Commission for the Reform of International Corporate Taxation (ICRICT). He tweets at @DanielBertossa