When Does Beneficial Ownership Transparency Improve Revenue Collection? Three Considerations for Developing Countries
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Recent years have witnessed an accelerating push to expand access to information on the beneficial ownership of corporate entities. Those making the push seek to bring greater transparency to multinational tax strategies, identify personal tax-evading wealth held overseas and combat global networks of criminality and corruption.  There is enormous potential for these efforts to contribute to improvements in tax collection in low-income countries.  However, there are also significant reasons to worry that this potential may not be fully realized in practice.

There is an increasingly evident need for those involved in these debates to more systematically assess whether expected benefits are likely to be realized in practice. Without such as assessment, tax authorities in low-income countries – and their supporters – have a harder time gauging how much to invest priority resources in supporting, and advancing, these efforts, and related initiatives around Automatic Exchange of Information (AEOI) and Base Erosion and Profit Shifting (BEPS).

Thus, along with the Transparency and Accountability Initiative, we developed a policy brief to explore a critical question for governments and civil society:  

To what extent are current efforts to expand access to information on beneficial ownership likely, in practice, to enhance the ability of low-income countries to increase tax collection? 

The policy brief does not seek to answer this question, but rather to map a way forward in assembling the empirical material necessary to do so.  It proposes that for efforts to expand access to beneficial ownership to translate into improved tax outcomes in low-income countries, three broad conditions will need to hold true to a meaningful extent:

  1. Beneficial ownership information is relatively complete and accurate – including participation by all major jurisdictions
  2. Major jurisdictions will to reliably share that information with tax authorities in low-income countries
  3. Tax authorities in low-income countries will need to be technically able, and politically willing, to make use of that data to strengthen tax enforcement.

Each of these things may hold true.  But there is growing reason to worry that, for low-income countries, they may not (including due to the failure of OECD countries to do their part in generating and sharing beneficial ownership data).  The most urgent need is correspondingly for systematic, publicly available, research and data to assist low-income countries and their allies to assess the extent of likely benefits, cost, and timelines.  In turn, in so far as the realization of these benefits is uncertain, or costly, it makes sense for those same actors to at least consider potential alternative paths forward and clarify the strategies most likely to serve the interests of low-income interests. 

TAI donor members seek to support the development of more inclusive and equitable tax governance. Under our Taxation and Tax Governance work stream, we explore the potential of creating beneficial ownership registers in enhancing domestic resource mobilization and ending anonymous shell companies. This policy brief has been produced with support from TAI. 

Photo credit: Skitterphoto at Pixabay

Download the Policy Brief