1. Home
  2. Press
  3. IW News
  4. The drawbacks of more transparency
Show image in lightbox The drawbacks of more transparency
(© Photo: chungking - Fotolia)
Share this article:

or copy the following link:

The link was added to your clipboard!

Corporate Taxation IW News 6. October 2015

The drawbacks of more transparency

Transparency is supposed to be the central issue during the meeting of the G20 finance ministers in Lima on Thursday. Politicians estimate this as key in order to fight against profit shifting by multinationals. The risks are widely ignored – but the potential drawbacks especially for Germany are obvious.

Share this article:

or copy the following link:

The link was added to your clipboard!

One of the most relevant instruments of the whole BEPS (Base Erosion and Profit Shifting) project is the country-by-country-reporting. According to this multinational enterprises will have to provide detailed financial and tax figures separated by each country. The purpose of gathering all the information is to show the full picture of the company’s global activities in order to ensure a fair taxation.

Who will be allowed to see this full picture? This question will be a subject to be discussed by the G20 finance ministers and was also raised by the European Union as part of a public consultation. While some argue in favour of an access for the public, others emphasize their concerns since companies might lose their competitive advantages when secret company data are known by the public. This means a risk for the future success of the company and, thus, for jobs. Therefore, the information reported should be exclusively used by the experts in the tax authorities.

Furthermore, more transparency should not only prevent cases in which a non-taxation occurs but also double taxation. If German tax officers know the global tax payments of a company they might have to reduce their claims. Or, the tax officers have to agree with their colleagues abroad on how to allocate the profits and tax payments according to the added value. Against the background of the impressive number of multinational companies located in Germany this could end up in tough negotiations with Chinese or Indian tax authorities who want to have bigger shares of the taxable profits.

In the long run, the approach by G20, OECD and EU will therefore not necessarily lead to higher corporate tax revenues in Germany. Moreover, the strong regulation and the increasing red tape burden will cause costs for companies as well as the tax administration. Germany as a location for business would suffer from this.

Share this article:

or copy the following link:

The link was added to your clipboard!

More on the topic

Read the article
Melinda Fremerey / Andreas Lichter / Max Löffler in CESifo Working Papers External Publication 20. June 2022

Fiscal and Economic Effects of Local Austerity

We study the consequences of a large-scale austerity program targeting financially-constrained municipalities in Germany. For identification, we exploit the quasi-random assignment of treatment among equally-distressed municipalities using a ...

IW

Read the article
Martin Beznoska / Christian von Haldenwang / Ruth Maria Schüler IW-Report No. 34 13. June 2022

Tax concessions in OECD countries

The Global Tax Expenditures Database (https://gted.net/) collects national reports on tax expenditures for 101 countries for the period from 1990 to the present.

IW

More about this topic

Content element with id 8880 Content element with id 9713