Publication of new tax transparency standards
New tax transparency standards released for governments around the world
- New guidelines for tax transparency, for use by international governments, organizations and civil society, have been published by the General Assembly of the Global Initiative for Budget Transparency (GIFT)
- Supported by the International Monetary Fund, the World Bank and the Organization for Economic Co-operation and Development (OECD), GIFT enlisted the expertise of academics from the University of Sheffield to explore ways to govern tax transparency worldwide.
- The new global principles are designed to improve the legal, regulatory and institutional frameworks that make up national tax systems
- To build public confidence and work towards full tax transparency, experts have determined that the UK should require annually published tax policy documentation and independently audited tax accounts.
New international standards to improve global tax transparency have been endorsed by the General Assembly of the Global Initiative for Tax Transparency (GIFT) and highlight areas where national governments need to improve the disclosure of their tax systems.
The standards are made up of 14 new guiding principles based on research by experts from the University of Sheffield and aim to help policy makers and a range of civil society actors make more informed tax choices and better understand the social and public benefits of their tax system.
Taxation is one of the fundamental principles of the social contract between governments and those they govern. It can, in particular, be used to influence social and economic outcomes in a society. Transparency in tax systems is therefore seen as essential for corporations to be able to hold policy makers to account and make informed judgments about whether their tax system is working in the public interest.
Professor Richard Murphy, from the Department of Accounting and Financial Management at the University of Sheffield, and Professor Andrew Baker, from the Department of Politics and International Relations, were approached by the Global Initiative for Tax Transparency (GIFT) to help draft the principles, which have now been approved and published.
The Principles provide a benchmark for companies to assess how successful their governments are in developing open, accessible and understandable legal, regulatory and institutional frameworks that make up national tax systems. No country currently achieves the highest level of transparency and relatively few, including the UK, are making limited selective progress in the advanced category of the Principles.
Professor Andrew Baker, from the Department of Politics and International Relations, University of Sheffield, said: “The Principles are really about creating the institutional mechanisms, processes and sources of information that societies need to debate and reflect on how to build, maintain and invest in their tax systems so that they become effective and powerful instruments to face pressing challenges such as the response to climate change. , reduce inequalities and maintain vital public services.
To build public confidence and work towards full tax transparency, experts have determined that the UK should require annually published tax policy documentation and independently audited tax accounts. Clear tax data enables civil society to understand what taxes have been collected and why, and to explain UK tax gaps and what can be done to improve the current tax system to reduce inequality and raise the greatest challenges facing society today.
Professor of Accounting Practice at the University of Sheffield Management School, Richard Murphy said: “For 20 years, civil society demands for tax reform have focused on abuses by big business and the very wealthy, with a particular focus on abuses facilitated by opaque tax havens. This has proven to be appropriate, but now is the time to also consider the transparency of national tax systems.
“GIFT’s principles of tax transparency are based on the assumption that a government is accountable for its actions. Taxing people is one of the most significant impacts of a government on its population. In this case, providing transparent data on why the tax is levied, on whom it is levied, how much is paid and with what result (including a comparison of expected and actual results) is fundamental for the public debate on taxation, economics and social policy. ”
GIFT has already drafted principles on transparency of public expenditure and on inclusive and participatory budgeting. Juan Pablo Guerrero, Network Director of GIFT, explains how this third set of tax transparency principles could bring improvements to any country that uses them: “The principles fill a major gap in the global architecture of budget transparency rules and aim to provide a solid yet flexible point of reference for policymakers and stakeholders to develop their own tax frameworks. They will help promote public debates enlightened on tax reforms that will allow tax systems to generate needed revenue more fairly and efficiently.
Professor Murphy added: “The principles were drafted following extensive consultations with multilateral institutions such as the Organization for Economic Co-operation and Development, the International Monetary Fund, the World Bank, national authorities and civil society partners from seven countries .
“Our hope is that these international organizations will use these principles to help governments improve their tax systems and accountability. But we also hope that governments will adopt them to achieve this goal, while civil society can use them to negotiate improvements that communities want. They are deliberately written to facilitate all of these groups.
Researchers will now work with GIFT and the international community on how best to apply and use the Principles in different national contexts.
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