How to make capitalism more transparent
But there is a big problem area, and it relates to company reporting and taxation. How companies report their business activities, and how they calculate and pay their taxes, have in the past often been too fiendishly complex and arcane for civil society organisations to get their heads around, so few have paid attention to them. As a result, the debates have been dominated by the tax experts - usually meaning people who are paid a lot of money, and people who are beholden to vested interests. Because of the resulting mismatch between the knowledge and influence of vested interests, on the one hand, and of civil society organisations, on the other, the vested interests have called the shots in this arena - which is central to the very workings of international capitalism. This mismatch is arguably one of the greatest problems facing those who would harness market forces for the benefit of societies around the world. TJN seeks to address this problem - by putting expertise in place to play a watchdog role, and waking others up to the issues.
One such problem area relates to company reporting. The European Union is currently considering whether to adopt an accounting standard called IFRS-8. Yes, to non-experts this sounds too arcane to bother with. But it will have vast and profound consequences. One problem with IFRS-8 is that companies will not be required to report what they and their subsidiaries and affiliates are doing in different parts of the world. Instead, they will be allowed to lump all their international reporting into two numbers: that related to the country where the company is incorporated; and that related to the rest of the world. So it will be impossible for citizens in most countries to unpick published data to work out what the companies are doing in their respective countries. This is a recipe for corruption, tax-dodging, and cross-border crime. Although the current set-up for company reporting is also bad in this respect, IFRS-8 is worse. The European Commission (EC) must reject it and stick to the existing set-up. For these reasons alone, IFRS-8 is a scandalous piece of work.
What the world needs is country-by-country reporting, made mandatory. (It is not the only approach either - we are developing other research on this too - see here for another option which could complement this campaign.) TJN's Richard Murphy has just made a new submission to the EC team responsible for considering IFRS-8. (His submission is written in rather technical language; read a more accessible version of his argument in the TJN newsletter, page 6, and find more background here.) Join the TJN campaign for country-by-country reporting. It's complex stuff, certainly, but no less important for that.