Call for Papers on Securities Litigation-of interest to those working on corporate tax transparency.

Securities regulations are near and dear to the hearts of tax practitioners and accountants who must deal with tax disclosures required in SEC filings.  Perhaps these regs have been less central to the work of tax law academics, but those of us following the extractive industries transparency initiative in particular (since it is already law) and country-by-country reporting more generally may soon find ourselves immersed in SEC compliance and litigation research. This upcoming workshop in Chicago could be a good opportunity to make some progress--paper submissions are due May 31:

The University of Illinois College of Law and the University of Richmond School of Law invite submissions for the First Annual Workshop for Corporate & Securities Litigation.  This workshop will be held on Friday, November 8, 2013, in Chicago, Illinois. 

OVERVIEW: This annual workshop will bring together scholars focused on corporate and securities litigation to present their works-in-progress.  Papers addressing any aspect of corporate and securities litigation or enforcement are eligible.  Appropriate topics include, but are not limited to, securities litigation, fiduciary duty litigation, or comparative approaches to business litigation.  We welcome scholars working in a variety of methodologies, including empirical analysis, law and economics, law and sociology, and traditional doctrinal analysis. 

Authors whose papers are selected will be invited to present their work at a workshop hosted by the University of Illinois College of Law in Chicago, Illinois, on Friday November 8, 2013. Local costs (lodging and workshop meals) will be covered.  Participants are asked to pay for their own travel expenses.
The workshop is designed to maximize discussion and feedback. All participants will have read the selected papers.  The author will provide a brief introduction to the paper, but the majority of the individual sessions will be devoted to collective discussion of the paper involved. 

SUBMISSION PROCEDURE: If you are interested in participating, please send an abstract of the paper you would like to present to Jessica Erickson at jerickso@richmond.edu  not later than Friday, May 31, 2013.  Please include your name, current position, and contact information in the e-mail accompanying the submission. Authors of accepted papers will be notified by Friday, June 28. 

QUESTIONS: Any questions concerning the workshop should be directed to the organizers—Professor Verity Winship (vwinship@illinois.edu) and Professor Jessica Erickson (jerickso@richmond.edu).

Public disclosure of global corporate tax info, coming soon in the US?

I was happy to see a rather lengthy discussion in Tax Analysts[gated] a little while ago, authored by Randall Jackson on the emerging US corporate tax transparency rules. These rules derive from a global movement to counter corruption, called the Extractive Industries Transparency Initiative (EITI). The US rules were enacted as a hasty and rather stealthy last-minute addendum to the Dodd-Frank Wall Street Reform Act of 2010, and have yet to be implemented, in part because of intense industry pressure. That pressure continues, especially from the American Petroleum Institute, even though that organization expresses support for EITI in principle. Jackson describes how the disclosure rules came about under Dodd-Frank, and what information is set to be disclosed when the first US companies begin making their disclosures thereunder (February 2014 at the earliest):

Dodd-Frank section 1504 amends the Securities Exchange Act of 1934 by adding a new section 13(q), "Disclosure of Payments by Resource Extraction Issuers," which requires country-by-country (and project-by-project) reporting of all payments, including taxes, made to all foreign governments and the U.S. federal government. (Analysis of Dodd-Frank .) 

The legislation requires companies engaged in the commercial development of oil, natural gas, or minerals that file a yearly report with the SEC to file an additional detailed annual report (new Form SD, which is separate from countries' 10-K annual report) listing all their payments, including taxes, fees (including license fees), royalties, production entitlements, bonuses, dividends, and payments for infrastructure improvements. Payments of at least $100,000 during the most recent fiscal year must be listed.

...Reports must be detailed and specific, listing payments to each foreign government, foreign subnational government, and the U.S. federal government. (Payments to subnational U.S. governments, such as state governments, need not be reported.) The reports will be publicly available online. 

More specifically, the reports must separately list each project and the types and totals of payments made in connection with each project; the types and totals of amounts paid to each government, including a separate list of the governments that received payments; the total payments by category; the currency in which the payments were made; the relevant financial period; and the business segment of the company that made the payment.

Jackson discusses the origin of the inclusion of the EITI addendum in Dodd-Frank (by means of an amendment by Senators Cardin & Lugar, whose prior attempt to pass EITI as a stand alone bill failed in 2009) and the subsequent industry pressure in some amount of detail. He includes a description of API's attempt to unwind the legislation via a legal challenge. API is arguing that the SEC failed to undertake a sufficient cost/benefit analysis of the rules, failed to study how the rules and costs would impact US companies doing business in other countries, and failed to create exemptions in cases where foreign law would prohibit the required disclosure. Jackson quotes the complaint: "the Commission did not even bother to determine how many countries had laws on the books prohibiting disclosure." He also quotes the SE's response:

[T]he SEC wrote that it had rejected commentators' suggestions to exempt firms operating in countries where the required disclosure is prohibited because the agency is skeptical that such prohibitions actually exist, and allowing exemptions would violate the spirit of the law. Furthermore, it said that allowing that kind of exemption could encourage foreign countries to pass anti-transparency laws or to interpret existing laws in a harsher fashion.

To which Cardin and Lugar responded:

"API wants to push us back to a time when the U.S. had few tools to add accountability and stability to the inherently unstable energy sector," Cardin said. "Congress and the SEC carefully crafted a reasonable and very manageable reporting requirement that will bring greater transparency to the oil, gas, and mineral sectors." 

"The U.S. economy and our values substantially benefit when our companies are working in oil-, gas-, and mineral-rich states," Lugar added. "But the benefits will not be realized if investments serve to entrench authoritarianism, corruption, and instability. With oil prices high and volatile, our economy needs more transparent markets, not less.

Cardin and Lugar, along with Senator Levin, have submitted an amicus curiae brief in support of the SEC, which Jackson quotes:

"Resource companies can believe whatever they wish and make any communication they wish about their payments to foreign governments, 'the resource curse,' or the benefits or costs of transparency; they have done so throughout this process. What resource companies may not do is impede the power of the legislative branch to require disclosure of objective information to fulfill compelling public policy objectives, including the strengthening of American national and energy security and investor protection."

It remains to be seen whether industry will be successful in pushing back the EITI regime; if not, we should start seeing the additional disclosure I believe by September of this year. So here is a question. How many multinational extractive industry companies are there in the world, and how many will be covered by the US EITI regime? In other words, if and when the US rules are in place, how many extractive industry companies will not have their information revealed through these disclosure rules by virtue of affiliation with US companies? Is it a few, many, or most? If anyone knows whether this is known or could be ascertained, I'd like to know.

US hammering out details on corporate tax disclosure/EITI?

Today the State Department hosted the first meeting of the US Extractive Industries Transparency Initiative Advisory Committee, the "multi-stakeholder group of civil society representatives, extractive sector companies, and federal and state government agencies that will guide implementation of this important transparency initiative in the United States."  From the notice:

The group’s meeting today is hosted by Secretary of the Interior Ken Salazar, the senior official leading USEITI in the United States. The State Department represents the United States on the EITI International Board, which is the EITI’s global governance structure. 

Today’s meeting represents an important milestone for the vision President Obama presented in September 2011 when he announced the United States intention to pursue full participation in EITI. This commitment underscores the Administration’s belief that this initiative benefits countries in all regions and at all levels of development. The United States has long supported transparency as a critical component of sound governance in countries’ oil and other extractive industries. Implementing EITI is one of the commitments made by the United States in its Open Government Partnership National Action Plan, which is an international effort to promote transparent, accountable and open governments.

The EITI international Secretariat posted this transcript of remarks by Secretariat Head Jonas Moberg, excerpt:

...the EITI in the US can contribute towards improved natural resource governance. It can contribute to the rebuilding of trust in offshore activities, towards natural resource governance without corruption and with greater certainty about companies paying the taxes and royalties they should be paying. 

An added bonus for the rest of us is that you send a clear global leadership message, demonstrating a willingness to practice what you preach. This global message is particularly important if we are to work together with the world’s large growing economies on improved natural resource governance. 

37 countries are implementing the EITI, and so you are joining a global community of multi-stakeholder groups that are working on these issues. 

...The interest around the world in what you are doing is considerable. Along the way there are some key decisions that need to be taken: on how the MSG will function, the scope of the reporting, the government and private sector entities that should participate, defining materiality and agreeing how much detailed information should be disclosed. 

I don't have any more info on how the meeting actually went and unfortunately the media doesn't seem at all interested in this movement forward for corporate tax transparency. More's the pity since everyone seems to be getting exercised about corporate tax avoidance and here is one very real and tangible approach being hammered out as we speak even as the industries campaign hard to prevent it coming to fruition.

Corporate tax: why disclosure is the key to reform

Two columns of interest emerged today on the issue of corporate tax disclosure, plus another interesting public hearing in the UK, this time with the big four in the hot seat.  Put all of this together and we can see very clearly the intense connection between tax reform and public understanding of the status quo.  With the latter as to corporate tax being woefully inadequate and relevant information intentionally hidden from public view, the former can be neither informed nor meaningful.  The answer is corporate tax transparency, particularly for multinationals, i.e., on the order of country-by-country reporting for listed companies.  First, on the columns, both from the FT.

In this one, John Gapper says "Companies are complying with laws that governments could change if they wished," and then explains:

Starbucks’ supposed immoral act is not to pay UK corporation tax that it does not owe, and would not owe even if it did not license its brand from the Netherlands. It obeys both the letter and the spirit of global tax law, which governments could reform if they wished.

That's 100% correct. And if you think there is some "spirit" in the transfer pricing law that isn't being acknowledged, then you are forgetting that the transfer pricing rules were effectively written by the industry they are meant to police. So I think the spirit is pretty much being well given its due. Gapper also nicely illustrates what I call the mercenary tendency of the tax state in an economically integrated world: agree with whatever seems politically expedient in principle, defect in practice:

I look forward to Mr Cameron naming and shaming companies such as Google (also a target of British politicians) if they are drawn from Ireland to the UK by his tax arbitrage. 

...Governments must decide which regime is fair, and companies and individuals must comply. 

... most companies that place operations or intellectual property in low-tax countries – or even in tax havens such as Bermuda – are not breaching the spirit of global tax law. They comply with a structure established under the League of Nations in the 1920s. 

This allows – indeed, encourages – multinationals to split their operations among countries, paying taxes as if they were separate entities, in order to avoid double taxation. They have to make transactions at “arm’s length” – as they would deal with others. 

It worked for a long time but is under strain because of the growing value of brands, intellectual property and intangibles to global corporations. “Ideas are their biggest asset, and what generate profits, and it is far easier to shift intangibles than factories,” says Jeffrey Owens, of the Institute for Austrian and International Tax Law.

Well, this is mostly right, at least close enough for its purposes. However, I am just not sure what principles we should expect to emerge when reporters turn, as they too often do, to Mr. Owens, former director of the OECD's tax arm and the man who presided over the demise of the corporate tax on a global scale under the nurturing constancy of the OECD's business-driven tax policy making machine, a person moreover who has publicly called for governments to "avoid like hell" any taxes on corporations. He would seem to be the last person you would ask about how to make a corporate tax system function, again, unless we are talking about that movie.  Gapper concludes:

Politicians thus have the choice of indulging in easy rhetoric against companies that obey the laws they have passed or struggling to reform the tax regime for little reward, with lots of disruption. In their position, I might posture too.

If that's not an argument for greater public accountability of how transfer pricing works out in practice, I am not sure what is.

That brings me to the second column of the day from the FT which illustrates why the public ought to know more about how these regimes work in practice, this one by Bruce Bartlett in which he asks, can publicity curb corporate tax avoidance? He lays out the case nicely for the runaway corporate tax base and he concludes:

[L]ittle in the way of real economic activity, such as jobs or tangible investment, has shifted anywhere. All that has shifted is the tax base. 

...This makes the international tax regime a ripe target for reformers.

... With reports of low domestic taxes paid by large profitable corporations such as Starbucks in the UK, the time may also be ripe for an international agreement to curb tax shifting. The US has recently implemented a law called the Extractive Industries Transparency Initiative that requires companies to disclose their payments to governments from oil, gas and mining assets. Allison Christians of McGill University argues that the expansion of such information reporting to the transfer pricing of all multinationals is the first step towards capturing the revenue now lost to the shifting of business costs to high-tax jurisdictions and revenues to low-tax jurisdictions. 

There is growing evidence that corporations are sensitive to the public outcry when they are caught avoiding taxation excessively. Starbucks, for example, recently agreed to pay more taxes in the UK than legally required to quell the controversy over its virtually nonexistent tax bill. The same shaming technique may have broader application to multinationals generally. 

As Justice Louis Brandeis of the US Supreme Court once put it, “publicity is justly recommended as the remedy for social and industrial diseases”.

First, thank you for the shout out, Mr. Bartlett! Second, this column demonstrates clearly the strong connection between tax reform and public understanding of the status quo, as I suggested above.  Tax reform is not going to come from the only party that has all the info it needs right now, namely, the IRS. Tax reform comes from public expression.  Right now, observers of tax policy need more information in order to offer meaningful reform proposals, and that information is being hidden because governments do not require it to be disclosed, plain and simple.  That is a matter of regulatory choice, and these columns show the choice is bad for policy analysis.

That then brings us to the UK's hearings today in which the public accounts committee taking on the big four accounting firms, trying to suss out what the letter and the spirit of the law is with respect to corporate tax on multinationals.  What emerges is the "perfectly legal" nature of all of this tax avoidance, again confirming the editorials by Gapper and Bartlett.  Here is the BBC's take on the hearings, worth reading in full.  Richard Murphy declares it a win for the PAC but the question is whether that translates to a win for those who do in fact pay taxes in the UK and elsewhere.

That question will be answered affirmatively if instead of killing EITI, which is currently apparently a high priority for many, we expand it to cover all listed companies.

Human rights and tax secrets

Think those two don't go together? Prince Charles begs to differ:

Prince Charles has used the Human Rights Act and the Official Secrets Act to block revelations about his tax affairs – even though Her Majesty’s Revenue and Customs has said the disclosure would be in the public interest. 

The move follows a bid to uncover the secret arrangements which allow the Prince of Wales to avoid paying tax on the Duchy of Cornwall, his vast estates which generated £18 million profit last year. 

The test case centres on a request by an academic who has asked to see correspondence between the Duchy of Cornwall and HMRC. 

But the Government and the Duchy of Cornwall have refused to agree to the release of the documents because the disclosure would breach Charles’s right to privacy. They also say the information is protected by the Official Secrets Act. 

John Kirkhope, an expert on trusts law from Weston-super-Mare, Somerset, is trying to use the Freedom of Information Act to uncover how HMRC came to grant the Duchy a tax exemption which is estimated to have been worth millions of pounds over the past century.

The issue here is the right of the public to know what the treasury already knows.  A spokesman for Prince Charles said "The Duchy is not a company and is not therefore liable to pay corporation tax." That is completely irrelevant. What is being asked here is not whether tax has been levied and if not why not, but whether the public has a right to know whether tax is being levied, and if not, why not.  That is a transparency question, the kind that animates EITI& CBCR. Of course, neither of these regimes would extend to the Duchy, since its not a public corporation.

Relatedly, notice that the Prince's right to privacy is the invoked protection against the government's disclosure of his tax information to a third party, i.e., a party other than the government itself. That right is, of course, what any UK taxpayer that also has US status will have to forego in order to fulfill the UK's FATCA obligations. No official secrets act protection in that case--just the data privacy act, which the UK has said only requires UK financial institutions to inform (not obtain consent from) their customers whose information they will disclose to the US.

Paper: Putting the Reign Back in Sovereign

I've just posted a draft of my paper, "Putting the Reign Back in Sovereign: Advice for the Second Obama Administration," which I presented at Pepperdine last week. Abstract:

In its first term, the Obama administration enacted two pieces of legislation, each designed to protect an increasingly vulnerable income tax base, and each of which had the potential to set a new and unprecedented course for no less than the regulation of the global economy by the nation-state. The first, the Foreign Account Tax Compliance Act (FATCA), sought to end global tax evasion through tax havens.  The second, a little-noticed two-page addendum to the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), sought to end the contribution of American multinationals to corruption in governance by codifying the transparency principles of the global Extractive Industries Transparency Initiative (EITI).  Both of these reforms reasserted a role for the nation state in regulating people and resources. But neither has yet to fulfil its potential. First, each has raised difficult questions about what the state can and cannot do to enforce disclosure and compliance on a global basis; failing to answer these questions is impeding implementation and aggravating an already-flagging taxpayer morale. Second, neither is broad enough: FATCA should be truly reciprocal and EITI should expand beyond the extractive industries. By acknowledging and responding in a principled way to the obstacles that limit their effectiveness, a second Obama administration could take significant steps to bring each piece of legislation to its potential, while ensuring that its scope focuses on its intended target in each case. This article outlines how these proposals could be accomplished and makes the case that they should be attempted.

I would be happy to have comments.  And in case it is of interest, here is a link to my powerpoint from the presentation as well (I don't know how to embed that here); you can actually watch the entire conference video here (my presentation was second to last).

What we know and can't know about MNCs and their taxes (a.k.a., why don't we know what Google actually pays?)

In Through a Glass Darkly: What Can We Learn About a U.S. Multinational Corporation's International Operations from Its Financial Statement Disclosures?, three accountancy profs explore what we can and can't discern from SEC disclosure about the taxes MNCs pay.  Here is the abstract:

We discuss the accounting rules that apply to reporting a U.S. company’s international operations. We use examples to illustrate diversity in accounting and offer caveats for policy makers, standard setters, analysts, and researchers regarding their interpretation and use of financial accounting information.

This is an important topic because it highlights a few of the many reasons why we might benefit from Dodd-Frank-style disclosure in the face of media stories about the low, low taxes paid on a global basis by companies like Google, Apple, and Microsoft.  The authors use case studies of SEC disclosures to highlight some of the book/tax differences that show why companies' reported tax rates are nowhere near their actual taxes paid.  For example, in the case of Google:

• Google’s “expected” provision at its federal statutory tax rate of 35 percent is a“hypothetical” federal income tax that Google would owe if all of its pretax book income was reported on its U.S. corporate income tax return.  
• In 2011, Google reported “income before income taxes” of $12.3 billion.  At a 35 percent tax rate, Google would owe $4.3 billion in taxes
• But Google reported an income tax provision (an amount it says it owes) of $2.5 billion, for an effective rate of 21%.  
• The difference between the headline 35% rate and the 21% effective rate is explained by book/tax reporting differences for various taxes and credits, some of which are permanent differences (will never be reconciled) and some of which could be reconciled in the future, but the big difference is explained by its "foreign rate differential," which is short form for what Google saved by reporting its income as earned outside of the US.

Much more in the paper.  The basic story is not new, but it's nice to see how the policy choices that go into corporate tax disclosure play out in practice and how they inform our understanding of how the tax system works.  The authors have a few suggestions for how non-accountants (including journalists) should understand and interpret what they find in SEC documents.  

I have been told that one of the reasons corporate managers resist greater tax disclosure in their SEC filings, such as is contemplated under Dodd-Frank and its impetus, the EITI regime (and country by country reporting more broadly) is the fear that people will misunderstand the information and therefore draw incorrect conclusions.  The authors acknowledge the validity of this fear and explore how companies make disclosure decisions with public perception in mind. Yet this paper itself provides an antidote to that fear.  It shows that tax data disclosure is capable of being correctly understood and interpreted.  We may need experts to help us do that in the face of flexible rules and ambiguous cases, but there is no shortage of experts.

Tax transparency: EU development

Richard Murphy points to a press release from Global Witness regarding developments in country-by-country reporting for the extractive industries in the EU:

Global Witness welcome today's European Parliamentary committee vote requiring that EU oil, gas, mining and timber companies publish their payments to governments to help deter corruption.  

The vote brings Europe one step closer to shining a light on payments worth billions of Euros by extractive companies to governments, which have previously remained secret, enabling corrupt government officials to siphon off or misappropriate natural resource revenues.

...The text also contains thresholds for payments that align with similar US 'sunshine' rules for US listed extractives companies set at the end of August.

...a final version of the directive goes to all MEPs for a European Parliamentary vote later in the year.

Arlene McCarthy MEP, the Parliament Rapporteur on the Transparency law, said after the vote in the legal affairs committee: "With this vote we now have a strong negotiating mandate to force the Member States and Commission to accept the Parliament's amendments, putting us on track to create strong global transparency standards, with equivalent rules in the EU and the US." 

More at the link.  

Corporate Tax Transparency: U.S. Update

A step forward in the global tax transparency effort: the U.S. SEC has finally approved rules for implementing the extractive industries transparency provisions of Dodd Frank s. 1504.  The rules were due, by statute, more than a year ago.  Industry lobbying against their issuance was fierce but, perhaps spurred by Oxfam's lawsuit compelling the SEC to stop its foot-dragging, the agency has finally produced.  Here is the announcement from the SEC.  A number of stories call this a big day for transparency and a big step by the US, from the New York Times, Global Witness, the Financial Integrity Task Force, the Brookings Institute.

Of course, as Brookings notes, the devil will be in the details, a.k.a., the implementation.  From their report:

Tomorrow those details will be in the hands of the SEC and will determine whether ‘effective transparency’ is attained or continues to remain elusive. Namely the SEC will determine whether the information that needs to be disclosed by companies is sufficiently detailed, relevant and accessible, enabling effective monitoring and analysis by civil society, investors and government reformists.

Given the content of the 2-year-old Dodd-Frank legislation, the SEC has no choice but to mandate disclosure. However, effective disclosure is by no means guaranteed as the SEC could issue weak rules, rendering disclosure ineffective. Thanks to Dodd-Frank legislation mandating transparency, the main danger is no longer wholesale ‘transparency evasion’ by many companies, but the more nuanced risk of enabling ‘transparency elusion’ (or ‘transparency avoidance’) by companies that wish to skirt detailed disclosure, thereby masking possible misdeeds.

Similarly, from the NYT:

Oil experts said it was difficult to know how onerous the payment disclosure rule would be since it was not yet known how the S.E.C. would define some of the requirements. Kevin Book, an analyst at ClearView Energy Partners, said in a research note that the ruling could “impose very real competitive challenges for U.S. companies,” particularly if “compliance leads to disclosure of previously secret terms of concessions, leases and production-sharing agreements.”

More on this to come.

Dodd Frank Regs & Getting the Gov to obey the law

Davis Polk has charted the progress of Dodd Frank rulemaking to date:

Source: FT Alphaville

The extractive industries corporate tax transparency regs would be within the red band in category "investor protection/securities laws," as we know these are hotly contested by industry and have been shamefully delayed over a year now since the deadline for their issuance (April of 2011).

Oxfam, one of the activist groups in the corporate tax transparency movement, filed a lawsuit against the SEC in respect of the failure to issue regs as the law requires.  From the press release, available at the financial task force:

International relief and development organization Oxfam America has today filed a lawsuit against the Securities and Exchange Commission (SEC) for unlawfully delaying the issuance of a Final Rule implementing a provision of the Dodd-Frank Act that requires disclosure of payments from oil, gas and mining companies to the United States and foreign governments. ...[T]his provision would provide information to investors and citizens in resource-rich countries, help stem corruption, and encourage the accountable use of billions of dollars in annual revenues from the oil, gas and mining sector. 

Congress set a deadline of April 17, 2011, for the SEC’s promulgation of the final rule that is needed to bring Section 1504 into effect. The SEC has now missed this statutory deadline by one year and one month. Oxfam America notified the SEC on April 16, 2012 that it would file suit if the regulatory agency did not issue a final rule within 30 days. As Oxfam America’s lawsuit states, “the extractive payment disclosures that Congress mandated nearly two years ago will not take place unless and until the SEC issues a Final Rule. Unfortunately, the SEC’s pattern of delay gives no assurance that it will ever promulgate a Final rule without the involvement of this Court.” The SEC issued a proposed rule on December 15, 2010.

A while back I posted the story about UK Uncut suing the UK tax authority for cutting generous deals with Goldman Sachs.  I wondered how they could do that, is there taxpayer standing etc.  Thanks to some of you reading this I have a clearer picture of how that can be now, will post more on this after I see what I can find out about the Oxfam suit.

The Lobbyists are Winning: Corporate Tax Transparency edition

The activist-led movement to increase multinational tax disclosure is proving to be a full-employment program for natural resource industry lobbyists.  The money and energy available for fighting against transparency seems limitless.  We have seen the effects of this in the US, where Dodd-Frank's section on extractive industry transparency has been completely undermined and consistently sidelined as a result of lobbyists.  We have seen the effects in Canada, where the industry managed to kill transparency legislation all together by means of a tidal wave of lobbying by the energy industry there.  Today the FT tells a similar tale unfolding in the EU.

There is a perhaps not obvious but very pernicious undercurrent in this transparency contest.  It is that in each country, lobbyists are using the success of the lobbyists in the other countries to bolster the cause for their own success.  No matter we may like to think about the nature of tax policy as somehow a sacred and protected space for purely national politics, that hallowed chamber of sovereign entitlement, it's clear that lobbying is fully globalized and therefore tax policy is, too.

Today's FT story provides a case in point.  First, the FT notes that the EU's work on transparency was prompted by the inclusion of new corporate tax information disclosure standards for resource extractors (think oil, gas, etc):

The European Commission last year proposed a scheme that allowed for payments for specific projects to be tracked, with reporting requirements that broadly matched the US approach enacted in the Dodd-Frank Act.

Just by putting the possibility of corporate tax transparency into legislation, even though it could not and still cannot be implemented without further action through federal regulations, Dodd-Frank put extractive industries transparency on the map of legislative possibilities, and therefore cleared some space for the policy to spread to other nations (I analyze this more thoroughly in my forthcoming book chapter on global tax activism).

The FT reports that industry in the EU responded by protesting the new rules as unnecessary, onerous, etc.--in other words, a set of self-serving arguments with which those of us who have been following this issue in the US and Canada have become all too familiar and most of which do not hold up under scrutiny.  But lobbying works very well, and so the EU is considering a much less transformative version of the proposal, one that would not require very much disclosure if any at all.

The FT closes the circle by concluding that:

If the compromise passes in Brussels, it will bolster industry arguments that the US rules being drawn up to implement Dodd-Frank should be watered down to match the EU approach and ensure a level playing field.

The idea that tax policy is in any sense a purely national project could not be more clearly debunked.  The EU's imminent adoption of a more lax standard arms lobbyists in the US with a fresh round of anti-transparency ammunition.  Their ability to use this to further the anti-transparency cause in the US will in turn re-invigorate lobbying in Europe and elsewhere.  This will continue until transparency is uniformly killed, unless the pro-transparency lobby gains a similarly viral foothold from which to reinvigorate the campaign for transparency.  It is an international game with fascinating network aspects and effects.  Too bad then that in the meantime, a policy that really ought to be implemented, not least because it is in fact written into the rule of law here in the US at least, will be stalled indefinitely.

On a related note, it is worth recognizing that a new euphemism is emerging in international tax policy that is steadily gaining ground through casual and unexamined use.  That is the idea that this or that tax policy is necessary to "ensure a level playing field." Both sides of the transparency issue have used the term to support completely opposing goals in the past, so it would seem that the term means very little.  That means a translation is in order when people use the term to score political points.

Let us be clear then that when used by opponents of transparency, "ensuring a level playing field" is what people say when they mean that the lobbyists are winning.  That is because a level playing field would quite obviously exist when the market has full information--that is, when all multinational companies engage in full disclosure of their tax payments in all countries, and all stakeholders--shareholders, taxpayers, governments, and watchdog groups--have the same information about how generous tax policies support industry all over the world (this is how the pro-transparency crown use the term).  When what is sought is a market with little or preferably no publicity of this kind of information, "the level playing field" means something very close to the current status quo--the product of all that successful lobbying to date.