Issues
Country-by-Country Reporting
The problem
Would you be surprised to learn that a huge multi-national corporation (MNC) worth billions of dollars was able to lower its tax bill to less than 1%?
Well, that’s exactly what was uncovered in November of 2014 when a trove of documents dubbed “LuxLeaks” gave a rare glimpse into secret tax deals arranged between hundreds of different MNCs and the European state of Luxembourg. Among the list were household names, from Pepsi to IKEA to Disney.
This information doesn’t include business secrets about how they produce the goods or services they sell, so why is it kept secret in the first place?
Beneficial Ownership
The problem
It’s usually pretty easy to find the name of a company, a listed address, and maybe even the names of some of the staff. But finding the name of the real owner?
That’s a different story.
While many business owners proudly put their names on their office doors and on the paperwork they fill out to create their companies, putting their name on those forms isn’t actually required in most countries around the world. This means that embezzlers, arms traffickers, and drug dealers can be business owners too—the only difference is that they choose to leave their names off the forms they fill out, allowing them to create “anonymous companies” that are perfect for hiding illicit cash.
Automatic Exchange of Information
The problem
As the world continues to globalize, money can move thousands of miles at the click of a button. While this helps facilitate trade, boost connectivity, and allows people to send money to family members around the world, this new global reality also allows illicit money to move with the same ease. Criminals, tax evaders and corrupt politicians get to take advantage of a porous financial system, but government authorities tracking these culprits have to work under the constraint of national borders.
Open Data
Technology has the power to change the way we understand our world. And this is no different for illicit financial flows.
While more and more data is making its way to the public (due to increased financial transparency requirements), it’s important that standards are in place to make data analysis as streamlined and uniform as possible. If information is published in open data formats, the information can be sorted, analyzed, and manipulated so that legislators, journalists and citizens can have a better understanding of the world around them. Whether that’s understanding how much in taxes a multinational corporation is paying on a country-level basis, finding the web of owners of a corporate structure, or seeing where your tax dollars are being spent in the budgeting process, open data vital to our work. If implemented correctly, open data standards can help embolden citizens to becoming more engaged in the public debate.
Read our 2016 working paper and policy brief on open data and illicit financial flows here. You can also read about the Open Data for Tax Justice Initiative, of which the FTC is a member, here.