TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Wednesday, June 21, 2017

Marian Reviews Blank's The Timing Of Tax Transparency

Jotwell (Tax) (2016)Omri Marian (UC-Irvine), Is Tax Transparency A Panacea For Popular Discontent With the Tax Ssytem? (JOTWELL) (reviewing  Joshua D. Blank (NYU), The Timing of Tax Transparency, 90 S. Cal. L. Rev. 449 (2017)):

Tax transparency is all the rage these days. The brouhaha around the disclosure (or, in one instance, the non-disclosure) of presidential candidates’ tax returns during the 2016 presidential campaign brought the matter of tax transparency to the front and center of public discourse in the United States. Around the world, recent revelations that multinational corporations dramatically reduced their tax bills by securing secretive rulings from tax authorities, and that billionaires are able to use intricate offshore shell structures to evade taxation, are causing major popular uproar and a demand for increased transparency on tax matters. The demand is heard by intergovernmental as well as national bodies. For example, the Organisation for Economic Co-operation and Development (OECD) recently adopted country-by-country reporting standards, which would require multinational corporations to disclose to tax authorities their activities and tax payments in each country in which they operate. Remarkably, some countries have announced they are considering making the reports public. Another example is Luxembourg, which—responding to international criticism—recently announced it will start publishing redacted versions of advance tax agreements with taxpayers. This represents a dramatic shift in Luxembourg’s usual secretive tax stance.

Against this background, Joshua Blank’s article—The Timing of Tax Transparency—is both perfectly timed and profoundly instructive. Policy choices about whether to disclose tax return information as well as tax administrators’ enforcement actions to increase public scrutiny have generally been viewed as a balancing act between competing values. Increased transparency may improve tax authorities’ accountability and encourage taxpayers to avoid aggressive planning for fear of public backlash. On the other hand, increased transparency hurts taxpayers’ privacy and may provide aggressive taxpayers a clear picture of tax authorities’ inner workings, which in turn may impede tax authorities’ enforcement efforts. The main innovation in Blank’s paper is his abandonment this binary approach towards tax transparency (increased tax transparency: yes or no) in favor of a time-dependent approach (increased tax transparency: when?). Blank argues that the balancing act between the competing values involved plays out differently depending on when—during the administrative tax process—disclosure is made.

[E]ven if one were to reject some (or all) of Blank’s practical applications, Blank’s article offers an important contribution to the literature on tax transparency. It shifts the debate away from its seemingly binary nature, and offers a completely original approach to evaluating tax transparency. In doing so, Blank challenges us to think about tax transparency in an original and a more nuanced way, which generates counter-intuitive outcomes that demand further research.

Scholarship, Tax | Permalink