Even Investors Are Worried About Corporate Tax Avoidance

You know things might have really gotten out of hand when an investor and shareholder writes an op-ed that worries about “egregious tax practices” by multinational corporations. Morris Pearl, a former managing director at Blackrock, is not really worried about the loss of tax revenue but is concerned that all of a sudden a big corporation will be hit with a huge retroactive tax bill as has happened to Apple. According to Pearl, “Apple will now be embroiled for years in lawsuits relating to a ruling by Europe’s antitrust enforcer, which ordered the company to pay $14.5 billion in back taxes.” Pearl is upset because it was almost impossible to have figured out what risky tax avoidance strategies Apple had taken and therefore there was no way to evaluate those risks. According to Pearl,”[N]o reasonable investor could have known the full scope of Apple’s overseas tax shelters, which were not detailed in the company’s financial releases. That took multiple investigators with subpoena power working for a United States Senate subcommittee nearly a year. And there was no obvious way for investors to know the particulars of Apple’s Irish deal or how risky it might prove to be.”

Incredibly, the SEC is worried about providing too much information. According to Chairwoman Mary Jo White, that there might be an “information overload” that would make it hard for investors “to wade through the volume of information she receives to ferret out the information that is most relevant.” Pearl is correctly appalled and is calling for more transparency. He specifically proposes that “Investors should, at a minimum, be given a list of all countries in which a company operates, the revenue and earnings attributed to each country, and the amount of taxes paid in each. There might still be disputes but at least investors would be working from the same numbers. Nothing in the current S.E.C. rules requires even that simple statement from companies.” That sounds admirable and I’m sure even progressives would applaud that move. Because, once people see how little tax these multinational corporations actually pay, the outrage will be immense and the pressure to crack down on these tax cheats will continue to grow.