Financial transparency vital for accountable democracy

The United States tax authorities have recently reported that foreign corporations, incorporated in Ireland but controlled by 666 American corporations, reported current earnings and profits, before tax, of $87.12 billion for 2010 and that tax on these earnings amounted to $2.9bn (3.3%).

The corresponding earnings of this cohort for 2004 were €24.78bn on which the tax liability was €1.6bn (6.4%). The scale of these earnings was equivalent to 12% of our GDP in 2004 and 42% of our GDP in 2010.

By way of comparison, the current earnings and profits in 2010 of over 3,200 American controlled foreign corporations incorporated in France and Germany was $31.4bn which incurred a tax liability of $5.1bn (16.2%). The earning of over 3,300 American controlled corporations in the United Kingdom was $20bn lower in 2010 than the earnings of their Irish counterparts, but the tax wedge was $9.1bn (13.4%).

The Irish corporation tax system is statute based and its characteristics of transparency and simplicity are promoted across the world as being advantageous. But could the quality of transparency be substantially enhanced if all taxpayers’ returns were disclosed in the public domain by the Irish authorities? Norway has disclosed details of tax returns since 1861 and Sweden and Finland also have an online public tax payment and wealth disclosure regime.

The State routinely publishes detailed lists of tax defaulters, the price details and addresses of house purchase transactions and details of individual wills and legacies, so the concept of transparency and public fiscal accountability is neither alien, unprecedented or lacking in public benefit.

Financial transparency is a vital component of a progressive and accountable democracy. The communication of tax payment information would strengthen the relationship between a company and the stakeholders who are the source of its prosperity and growth by demonstrating the substance of the contribution being made to the societies that sustain it; by enhancing public trust and by reducing reputational risk.

At the level of the individual, the tax affairs of persons seeking important offices in the political, charitable, judicial and business domains would be available for scrutiny, as has been the case with respect to candidates for the US presidency since 1970.

Myles Duffy

Bellevue Avenue

Glenageary

Co Dublin