Global Asset Registry Not 'Some Futuristic Utopia,' Group Says
Taxnotes
POSTED ON MAR. 27, 2019
Posted on Mar. 27, 2019
By Stephanie Soong Johnston
A global wealth asset registry is within reach and would not only provide much-needed linkages within the existing transparency framework, but also build upon measures like automatic exchange of information, a civil society group says.
In a March 25 report, the Independent Commission for the Reform of International Corporate Taxation (ICRICT) underscored the seriousness of wealth inequality, which poses a risk to economies, societies, and even democracies in general.
It’s difficult to measure the exact extent of wealth inequality because offshore structures, including companies, trusts, and foundations, can hide the true ownership of wealth assets, the paper says. However, the data collection framework comprises “potentially powerful tools for transparency,” such as the automatic exchange of financial account information, as well as country-by-country reporting data between tax authorities and the adoption of public beneficial ownership registries, the report adds.
“This information alone, if combined with consistent legal entity and taxpayer identifier numbers, would provide a powerful core of transparency on wealth inequality,” ICRICT said. However, the report notes that those approaches aren’t foolproof. For example, individuals can circumvent automatic information exchange requirements under the OECD common reporting standard for automatic exchange of financial account information by misrepresenting their true tax residency. Automatic information exchange is also limited to financial assets but not physical assets, such as real estate, fine art, or hard cash, the report says.
Public beneficial ownership registers are also emerging as an international standard, but many jurisdictions still object to them, particularly the British overseas territories and crown dependencies and the United States. ICRICT pointed out that CbC reporting data are only available to tax authorities.
The creation of a global asset registry (GAR) would link the data that already exists and fill in the gaps when it comes to measuring and understanding wealth inequality, the paper adds. “A global asset registry need not be seen as some futuristic utopia, but rather as a feasible and sensible extension of current transparency approaches,” ICRICT argued. “The aspiration to record wealth inequality should not be seen as radical.”
While the exact details of what a GAR might look like and how it would work in practice are not defined, it should have some clear characteristics, according to ICRICT. For example, a GAR should contain beneficial ownership data on assets, as well as data on legal ownership chains.
The register should avoid relying on such beneficial ownership details as names and addresses, given the myriad ways in which an individual can convey that information, such as differences in translating from one language to another. Instead, a GAR should include numerical data, such as passport numbers and taxpayer identification numbers, to avoid such issues, the report says.
A GAR should also contain “machine-readable data” — data that aren’t paper documents or photos of documents — so that information can be more easily cross-checked, the report adds. Such a register should either be truly global, or at least comprise the interconnection of existing national asset registers, the report says.
It still remains to be seen what kind of assets a GAR would cover, ICRICT says, adding that it should, at minimum, include immovable property, as well as movable property that’s already registered elsewhere, such as houses, planes, and cars. A GAR’s scope could also depend on a set asset value threshold and could be limited to hard or intangible assets, as well as financial assets, the report says.
As to whether a GAR would be confidential or public, the paper notes arguments for both sides, but also presents a potential solution. “A compromise between public knowledge and confidentiality may determine that access to GAR information could be public in relation to some public officers, such as those politically exposed persons, but not regarding private citizens,” the paper says.
ICRICT laid out an approach for a potential GAR pilot, which would require overcoming several obstacles, including hammering out design and scope issues, as well as securing the political buy-in necessary for such a project to take place. Capacity constraints may also prevent countries, particularly developing ones, from pressing ahead with a GAR, the paper adds.
However, a narrowly defined pilot could be possible, perhaps led by the EU, “which has been at the vanguard of transparency measures,” the paper says.
The idea for a GAR is one that the Financial Transparency Coalition, a network of civil society groups and governments, has been discussing in recent years, according to Lakshmi Kumar, policy advocate at Global Financial Integrity, a coalition member.
“A global asset registry is truly an ambitious plan,” Kumar told Tax Notes. But there are many factors to consider, such as costs, maintenance requirements, privacy concerns, and questions about who can access such a register, she added.
It will take a while to fully flesh out the idea but establishing beneficial ownership registers would be a good first step toward a full-fledged GAR, Kumar said. The Financial Transparency Coalition is planning a conference at some point soon to discuss the idea of a GAR further, among other things, she added.
A balance must be struck on what’s practically feasible in terms of resources and political will, according to Monica Bhatia, head of the secretariat of the OECD’s Global Forum on Transparency and Exchange of Information for Tax Purposes. Another big issue is figuring out a mechanism to ensure that the data in a register are continually updated, which is difficult if the companies listed become inactive or defunct and stop filing information, she said.
“But as far as tax [authorities] are concerned, they just need to get that information quickly when they need it,” Bhatia said. “And it’s important that it’s accurate and up to date. That’s the conundrum you have to solve if you’re going for consolidated registers for the public.”