EU Announces Tax Blacklist
Never underestimate the power of negative publicity. Especially in the age of social media. Words of bad deeds can travel at the speed of light these days, and if, as an individual, a company, or even a country, you are on the wrong end of a public relations backlash, you may have no choice but to appease your accusers.
Multinational companies are increasingly worried about the reputational impact of negative exposure of their tax affairs in the media. Indeed, last year, Taxand surveyed chief financial officers and tax finance directors across Europe, Asia, and the Americas and found that 91 percent of respondents felt media scrutiny of their tax planning activities had a negative impact on their public standing compared with 51 percent in 2011 and 77 percent in 2015.
Although Facebook didn’t explicitly say so, it seems likely that the increasingly negative perceptions of the tax affairs of large internet companies played some part in its decision to significantly restructure its tax affairs so that it will pay more tax in countries where its users are based, instead of in Ireland.
Yes, to name and shame seems to have become very much part of the zeitgeist. But this is nothing really new. Some tax authorities have been at it for years. It has almost become an integral part of their tax enforcement arsenals.
Indeed, it has become commonplace for whole countries – groups of countries in fact – to stand in righteous judgment over their peers, in the belief that the “uncooperative” will become cooperative, and mend their unsavory tax ways. And in the process, it may help deflect people’s attention from shortcomings that lay much closer to home.
The naming and shaming method of choice seems to be the tax blacklist. EU member states have them. And now the EU itself has one. Curiously, the OECD used to have one, but by 2009 it had considered all territories which were once on it to be suitably chastised and penitent enough to be given a second chance. It begs the question: if the OECD had a blacklist now, which jurisdictions would be on it? The same ones as are on the EU’s? It’s impossible to say, but I suspect not.
While countries seemed to be on the same page when the BEPS project was first fathomed, there seems to have been a breakdown of the international consensus on how to mount challenges to those not towing the line.
For more information on this, and other topical international tax matters, please visit: https://www.cchgroup.com/roles/corporations/international-solutions/research/global-tax-weekly-a-closer-look