Global Asset Record Would Bolster Fair Taxation, Report Says

Law 360

By Todd Buell · March 25, 2019, 5:47 PM EDT

A global asset registry would help measure wealth inequality and support appropriate taxation, a group of academics and civil society representatives said in a report published Monday.

The group, the Independent Commission for the Reform of International Corporate Taxation, said in the report it recognized that a truly global registry of asset ownership would be difficult to achieve and could face complaints that it violated people's right to privacy.  

Wealth inequality creates serious risks to economies, societies and healthy democracies, “yet the actual magnitude of wealth inequality is unknown because of the deep financial secrecy that surrounds it,” the report said.

“And not unrelatedly, wealth, in contrast to income, is rarely subject to progressive taxation aimed specifically at limiting overall inequality,” the report said.

The authors of the report argue that a global asset registry would help provide missing wealth data.

“A GAR need not be seen as some futuristic utopia, but rather as a feasible and sensible extension of current transparency approaches,” the report said. “This will revitalize a broken social contract in which private property received protection from the law, in exchange for disclosure of ownership — and the payment of applicable taxes.”

It asserted that the desire to record wealth inequality shouldn’t be viewed as something radical.

“It is the status quo that is radical, in allowing private property to be protected by the law without disclosure of its ownership or of how it was acquired,” the report said.  

The report acknowledged that many features of a global asset registry have yet to be defined in detail, such as its scope and who would have access to the information. 

It said that making a registry public would allow citizens to hold authorities accountable for ensuring the accuracy of the registry — and could also reveal cases in which public officials are enriching themselves unfairly. On the other hand, the report cited arguments by opponents to public access who note that identifying the wealth of a private person violates the individual’s right to privacy and might raise the risk of kidnapping or extortion.

The right to privacy "is not an absolute right," the document said.

"It may be limited under specific conditions … provided that interference is neither arbitrary nor unlawful,” the report said. Protecting privacy "requires balancing choices and procedures to achieve a result that is legally and socially acceptable,” it said. 

On the question of kidnapping, “it could be argued that there is no evidence of correlation, let alone causation, of asset disclosure" with those events, the report said.

A global asset registry would have an impact on rich people who try to live quietly and hide their wealth, the report acknowledged.

“However, it could be argued that the potential benefit for society as a whole to tackle inequality and financial crimes, ensure transparency and access to information outweighs the right to privacy of those ‘quiet’ rich people,” it said.

While disclosing beneficial owners of assets is considered key to stopping illicit financial flows, some advisers to high-net-worth individuals object to the loss of privacy.

Speaking at a November conference in Cyprus, Jimmy Sexton, a Dubai-based tax adviser, said, “I don’t think it’s necessary to have these additional registers, and certainly not public.”

He added: “They did all this ‘know your customer’ to stop terrorism, and terrorists are still blowing things up. It didn’t stop money laundering. It didn’t stop terrorism, and beneficial ownership isn’t going to stop people optimizing taxes.”

Sexton was also worried about the amount of data the government can now collect about citizens, and he made a provocative comparison to World War II.

“People should be afraid of the government,” he said. “Imagine if the Nazis had, in the Holocaust, a list of all the assets everyone had. People have a right to privacy, to a certain degree.