CAPITALISM'S ACHILLES HEEL Dirty Money and How to

348 CAPITALISM’S ACHILLES HEEL
Some senior figures have advised me that tax confidentiality has in recent
years become politically inviolable. I hope not. I find far more compelling
the case that capitalism must cultivate and maintain public trust.
With published tax accounts, many of the corporate scandals of the past
decade would not have occurred and many more would be prevented in future
years. Citizens and shareholders have a right to know that chartered
public corporations are operating lawfully in all matters, including paying
proper taxes in the home country and abroad. Corporations have misused
tax confidentiality and in my view should now lose tax confidentiality. Capitalism
will be much better off when its exemplars can be judged on how
law-abiding they are in pursuit of profits. This issue will be around for some
years to come.
Concerning both corporations and individuals, it’s time for governments
to exchange tax information. Earnings on accounts held by foreigners
should be reported to home countries. Government-to-government sharing
of financial data will go far toward curtailing illegal financial flows. This is
the sort of step that is purely a matter of political will.
MISPRICING AND TRANSFER PRICING
How can mispricing in unrelated-party transactions and abusive transfer
pricing in related-party transactions be reduced in international trade
without regulating prices? The answer is straightforward. Demand honesty
in pricing.
The first thing that has to be done is to bring both exports and imports
under the same legal regime. Take the United States, for example.
U.S. Customs administers laws on imports into the country but does not
administer all laws on exports out of the country. Yes, Customs does collect
the Shipper’s Export Declaration, which identifies cargoes and states
prices, but Customs does not own the data. The Commerce Department
receives the information and does virtually nothing with it. Customs
wants to assure proper pricing on imports in order to collect duties, but
Commerce wants to ignore proper pricing on exports, which often brings
illegal, tax-evading money out of other countries into U.S. coffers. False
pricing can be significantly diminished when each nation treats imports
and exports the same.