The Panama Papers reveal how members of the global elite have exploited legal loopholes to hide their wealth overseas—a significant disclosure, but one that mainly concerns individuals rather than corporations. Still, public outcry after the leak has offered international authorities an opportunity to push for corporate tax reform.
The Panama leak has accelerated the global tax reform agenda introduced at the G-8 meeting at Lough Erne in 2013, where leaders agreed to work toward a “common template for multinationals to report to tax authorities where they make their profits and pay their taxes across the world.” This became known as country-by-country reporting, a system in which transnational corporations would break down their financial information—profits, revenues, taxes, and so on—by country rather than simply reporting a global or regional figure.
The British accountant Richard Murphy first articulated the idea of country-by-country reporting in 2003. Murphy is associated with Tax Justice Network, a coalition of researchers and activists. The group relies on assistance from charitable foundations and has an operating budget of less than $1 million. Yet it has played an outsized role in promoting tax reform, advocating Murphy’s approach in the United Kingdom, the European Commission, the European Parliament, and the Organization for Economic Cooperation and Development (OECD).
The idea behind corporate tax reform is simple: just as individuals should pay their fair share of taxes, so, too, should corporations
EU and OECD member states are divided over their support for the measure. Countries known for their tax efficiency, such as Ireland and the Netherlands, have voiced their opposition. European firms have also argued that disclosing information under country-by-country reporting puts them at a competitive disadvantage.
Outside of Europe, there has been more progress. India has embraced country-by-country reporting, as have Japan and Russia. In late April, Bermuda became the 33rd signatory to the OECD’s Multilateral Competent Authority Agreement,