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Judith Samuelson Headshot

NGOs Need to Keep Pressing Business to Be Transparent Taxpaying Global Citizens

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Many global corporations seek to minimize the taxes they pay by lavishly paying lawyers and accountants to concoct elaborate tax avoidance schemes. And evidence mounts they also are trying mask the political contributions they make to lubricate the wheels of commerce and maximize their profits.

One thing is for sure: NGOs such as War on Want and the Tax Justice Network, that have been fanning the flames on the issue of corporate tax avoidance, are not likely to give up. These are among a number of some small yet influential organizations that are committed to shining a light on these unseemly business practices.

Last week, under pressure from such activists, the government of Ireland took a step towards closing a loophole used by Apple to avoid billions in corporate taxes. If the Irish actually implement the draft legislation under consideration, by 2015 multinationals registered there will no longer be able to act "state-less" for tax purposes.

Seems like an important step towards common sense in corporate taxation.

There are much bigger fish to fry, like the need to rationalize the global tax system and eliminate the biggest tax havens and schemes for tax avoidance--schemes that go by exotic names like the "Double Irish" and the "Dutch sandwich." But it's a start and--who knows--could one day be part of a more comprehensive plan in this country to lower the corporate federal tax rate of 35% (plus state taxes) to make the US more competitive, while reducing the pressure to seek out tax havens and tax-avoidance schemes to begin with. The goal is a level playing field. One can hope.

Which brings me of another critical area where another small but focused NGO has been shining a bright light on corporate practice, to good effect. The Center for Political Accountability has just released the 3rd round of the "CPA-Zicklin Index of Corporate Political Accountability and Disclosure" produced in partnership with the Zicklin Center on legal studies and business ethics at Wharton. The Index attempts to measure the transparency of large companies when they make political contributions. The Index is basically a ranking of companies that rewards (or shames) the targets based on a set of factors that measure intention and transparency. And the work is getting traction.

How do we know this? Two reasons: one, the Center reports that the number of US companies that have signed disclosure agreements with the CPA and its partners continues to rise. Second, the basic principle of disclosure and, specifically, this Index are under attack by the mainstream business associations with the biggest footprint in Washington.

Who can be against disclosure?

A recent letter from the three business lobbying organizations--the US Chamber of Commerce, the National Association of Manufacturers and the Business Roundtable--critiques the Zicklin Index, (named for Larry Zicklin, the former CEO of Neuberger Berman and major donor behind the ranking). The letter calls the Index the "Campaign to Quiet American Business." You can find their reasoning here in a letter to their constituents, but basically the letter says don't disclose your political contributions because you don't have to, and because even if you do, you will still be under pressure to do more.

Bruce Freed, the head of the Center of Political Accountability makes his case in a letter to the Wall Street Journal. He rejects the assertion that the spending itself is all bad, but rather focuses on the business reasons--and societal need--for exposing how the money flows. You are left to your own opinion about whether we need to go further to reduce the spending itself. (Put me down for a yes.) Last week, Isabelle Durant, a Vice President of the European Parliament had this to say about the growth of business influence in EU policy: "I am not against lobbying, but I am against lobbying opacity. We have to know who works for whom and how much money they are being paid." I think, at a minimum, the same kind of principle should apply in the US.

I have been both a lobbyist and a banker, and I understand the instincts of the business associations to protect their members, but from a societal perspective, exposing the money behind the politics is just common sense. To be effective over the long haul, trade associations need to balance the interests of the public with the private interests of their members. It is our good fortune that a growing number of members of the Business Roundtable--48 in total or roughly a quarter of its members--have signed the disclosure protocols and seem to agree.