You can’t have your cake and eat it. Either you decide to pay your fair share or to be transparent. But you can’t hide and at the same time pay close to nothing in taxes. If you want to stay in secret as well as to be low-taxed, then you have to disclose it.

INCENTIVE-BASED TRANSPARENT SOLUTION. If the multinational entity did not opt for voluntary transparency and its global effective corporate tax rate were below 11,25%, it would be obliged to submit its corporate structure up to the ultimate shareholders to the authorities of the Member State where its revenues were the highest. In other words, the multinational entity would either have to be able to prove to public authorities that in the preceding fiscal year it paid at least 11,25% in corporate tax or it would have to disclose its corporate structure to public authorities.

ADDITIONAL MEASURE. Moreover, if the disclosed global effective corporate tax rate were below, for example 5%, such multinational company could be obliged to publish the amount of its global effective corporate tax on all documents intended for the general public, such as on all kinds of advertisements, merchandising documents etc.

WHY SHOULD THE PROPOSED SOLUTION WORK? Because it gives a non-transparent low taxed multinational companies a simple choice: either to pay an „insurance“ of at least 11,25% of its profits against the risk of disclosure of its corporate structure and its tax “optimalisation” practices or to run an unknown and, thus “non-quantifiable risk”, that the disclosure of its corporate structure or its aggressive tax planning arrangements would ultimately damage its reputation and possibly its entire business. Any responsible shareholder or manager who minds a succesful long-term development of his business would opt for a “quantifiable insurance premium” rather than “non-quantifiable reputational risk” which, if materialised, could bring about only losses(even fatal ones).

PROPORTIONALITY. Of course, the outlined solution would work only if the “quantifiable insurance premium” against “disclosure risk” was not too high, i.e. that the company in question was able to pay this „premium“ without significant problems. This adequacy is ensured by two means: first, by setting the threshold of the „insurance premium“ at 11,25% of global effective corporate tax rate (GECTR). This is at the bottom threshold of statutory corporate tax rates of developped countries. Second, the costs of disclosure of corporate structure and the global effective corporate tax rate are inherently proportional to the size and, thus financial capabilities, of the business concerned. While the costs of disclosing and documenting their corporate structure can be higher for larger group of companies (these costs will be at the same time reduced by the “economies of scale” since such conglomerates have dedicated staff which can easily provide the necessary disclosure documents), costs for companies with less complex corporate structure would be proportionally lower.

EXEMPTIONS. Last but not least, the disclosure obligation needs to be carefully crafted in order to cause more harm than good. The corporate structure and global effective corporate tax rate disclosure has to be subject to certain exemptions, such as for companies benefiting from lower corporate tax rate due to social reasons, for example, for employing handicapped people, or for pension funds where corporate structure does not by its nature reveal ultimate shareholders or where disclosure of corporate structure could have unpredictable impacts on the stability of financial markets, such as disclosure of corporate structure of regulated financial institutions. Last but not least, disclosures of shareholders who acquired their shares through financial markets should also be excluded since regulations of financial markets allow for sufficient identification of parties to trades realised on these markets.