Panama And Paradise Papers

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Outcry over the revelations indicated in the Panama and Paradise Papers demonstrates the significant public concern with the usage of international tax havens. While tax arbitrage is often legal, many stakeholders have serious ethical and legal reservations about a firm’s tax avoidant behaviors. Investors are becoming increasingly aware of the regulatory and reputational risks encountered in secretive low tax jurisdictions. Furthermore, stockholders and creditors are also troubled that firms engaging in tax avoidance are distracted from other activities that would enhance firm value.
Corporate tax avoidance matters, however, are difficult to analyze without consistent geographical disclosures. Unfortunately, there is a significant lack of
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Furthermore, Form 10-K tax footnote disclosures are complex and relevant information is often not available nor easily extracted. While sporadic data leaks such as the Panama Papers can potentially influence how the actions of a MNE are viewed, leaked information is often suddenly available, incomplete, or not comparable to other companies operating in the same industry or country, potentially leading to cognitive overload.
Country-by-country reporting (CBCR) represents an alternative to these disclosure practices and better guarantees that sufficient taxes are paid in the locations where profits are generated. CBCR provides consistent jurisdiction-based, profit and tax information without regard to significance thresholds or management reporting preferences. Specifically, CBCR guidelines would require firms to provide country-specific information regarding the nature of corporate activities, net assets, profit before income tax, income tax accrued and paid, accumulated earnings, and the number of employees.
Tax fairness campaigners, including the Tax Justice Network and Publish What You Pay, contend that the jurisdiction-based data is of pivotal value to many stakeholder interests and would be utilized to enhance the stakeholder decisions of current and potential investors, consumers, employees, regulatory agencies, governments, and other concerned parties. Users could more clearly ascertain the purpose of a firm’s involvement in a

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