A crisis of trust
It is often said these days that there is a crisis of trust. Whether that’s a crisis of trust in our media, in our politics, or in our institutions. We at the All-Party Parliamentary Group on Responsible Tax have likewise been concerned about trustworthiness, specifically in the context of tax.
It is well known that companies cannot be trusted to report their tax liabilities in full. Meanwhile tax advisers still cannot be trusted to take a responsible attitude to their clients’ social obligations as taxpayers. Furthermore, there have long been concerns that HMRC, on the one hand, cannot be trusted to pursue large corporate tax avoiders with the full force of the law, and on the other hand, cannot be trusted to take a proportionate and even-handed approach in helping small businesses and the self-employed in their tax compliance. Finally, there are entire jurisdictions – many of them UK Crown Dependencies or Overseas Territories – which cannot be trusted to pull their weight in fighting tax avoidance and evasion, corruption and money laundering.
Putting words into action
It is important not to treat these concerns as merely an issue of presentation for the organisations and institutions concerned. The current crisis of trust seems to have been inevitable in a world which yields vast inequalities and visibly unjust outcomes, while maintaining a proliferation of opportunities for financial secrecy. A crucial element in improving trust lies in the actions people take, not simply the words they pronounce. Trust must be earned. And that involves serious self-scrutiny. Institutions and organisations should not ask themselves what would make them look more trustworthy; they should be asking themselves ‘what can we do to improve real-world outcomes that are driving these trust problems?’
So, for example, while I welcome the recent announcement on the part of the UK’s Crown Dependencies that they plan eventually to introduce public registers of beneficial ownership of companies, we know perfectly well that those jurisdictions had to be forced into doing so. In addition they are clearly planning to drag their feet in terms of actual implementation, with no details as to what data will actually be made public. These jurisdictions boast about the quality of the information on their existing secret registers of beneficial ownership – why not simply make that data public as soon as possible? This would not merely restore trust; that would be a side-effect. The more important result would be the opportunity afforded to tax authorities, investigators and prosecutors of crime and terrorism, journalists, and civil society organisations to get closer to uncovering the proceeds of economic crime and tax abuse the world over.
Providing a high level of evidence
But of course company beneficial ownership information is only part of the story, which brings me to that other meaning of the word ‘trust’ in a tax context: ‘trust’ as in the opaque and barely-regulated asset-holding vehicle. New EU rules require member states to set up semi-public registers of beneficial ownership of trust assets, but the UK government is proposing to implement these rules in such a way as to impose a heavy evidential burden on anyone wanting to show that they are entitled to view the information. This proposal does not reflect the practical realities of investigating tax abuse and corruption as a journalist or NGO. A requirement that a high standard of evidence be met prior to even accessing any information on the register would stymie many investigations.
It is as if the UK government wants to positively protect those who dodge their obligations, rather than facilitating the role of NGOs and journalists who expose them. We fear that this proposal shows the UK at its worst – presiding over a network of financial secrecy, and deliberately shielding assets from the kind of transparency that is needed in order to combat a wide range of abuses. This is absolutely not how trust is to be restored in our public sphere.
The views and opinions expressed herein are those of the authors and do not necessarily represent the views and opinions of KPMG International.
Margaret became the Labour Member of Parliament for Barking in June 1994. She has served in government, holding portfolios across education, work and pensions, business and culture. In 2010, Margaret also became the first elected Chair of the Public Accounts Committee and was also its first female Chair. Today, Margaret is the Chair of the APPG on Responsible Tax as...