Don’t
Ask, Don’t Tell
By
Phil Mattera in the Dirt Diggers Digest
Recent
revelations about the electronic surveillance programs of the federal
government, which are being carried out with the cooperation of large
telecommunications and internet companies, show that personal privacy rights
are in serious peril.
Much
is being said and written about the discrepancy between the seemingly
invincible status of the Second Amendment and the disintegrating Fourth
Amendment. Yet the more significant contrast may be between individuals and
corporations with regard to privacy and protection from government intrusion.
Although
the finances of publicly traded companies are supposed to be an open book,
firms are not required to make public their tax returns. This allows them to
conceal the inconsistencies between what they disclose to shareholders and what
they report to Uncle Sam.
The
recent report by
the Senate Permanent Subcommittee on Investigations about tax dodging by Apple
showed there was a $4.4 billion discrepancy between the FY2011 tax liability
presented in the company’s 10-K annual report and what it listed in its
corporate tax return (which the committee had to subpoena).
Revelations
about Apple and other tax dodging companies has not resulted in any action by
Congress. The European Union, by contrast, is moving ahead with a
transparency initiative that will thwart tax avoidance and illegal financial
flows.
Anti-corruption
and pro-transparency groups in the Financial Accountability and
Corporate Transparency (FACT) Coalition have been pressing the
Obama Administration to support a plan, backed by British Prime Minister David
Cameron, to require the registration of owners of shell companies—a move that
would make illicit financial transfers more difficult. The idea will be
discussed at the upcoming G8 summit, but there is little indication that Obama,
much less the U.S. Congress, is prepared to sign on to Cameron’s “transparency
revolution.”
Large
corporations enjoy a great deal of privacy with regard to state as well as
federal tax liabilities. Publicly traded companies are required only to
disclose aggregate figures on the taxes they are paying (or not paying) to the
states overall, making it impossible to get a clue on how much dodging is going
on in individual states. Although there have been efforts at times to compel
publicly traded companies to make public their state tax returns, those
documents remain as private as their federal returns.
Corporate
financial statements are also usually devoid of any information on the billions
of dollars companies receive each year in economic development subsidies from
state and local governments. There has, however, been progress in piercing the
corporate privacy veil in this arena, but it is mixed.
At
the state level, disclosure is better than it has ever been, but there is a
great deal of inconsistency from state to state and from program to program
within states.
Much of the transparency progress relates to grant and low-cost
loans, while the tax breaks—which are often the big-ticket items—lag. Fewer
than half the states post a significant amount of information online about
corporate tax credits.
And
as my colleagues and I at Good Jobs First showed in a recent report, disclosure is even
more primitive among most large cities and counties. All the disclosed data is
collected in our Subsidy Tracker search
engine.
Taxes
and subsidies are not the only areas in which corporate privacy remains strong.
There are also serious limitations, for example, in what companies have to
reveal about their labor practices. Even publicly traded companies are
providing less and less in their 10-K annual reports about collective
bargaining.
Reading
the 10-K of Wal-Mart, for instance, you would never know that it has fought
tooth-and-nail against unions and is now facing a non-traditional organizing
campaign. Whether they are sympathetic or not to the goals of the campaign,
shouldn’t shareholders at least be told that it exists and what the company is
doing in response?
As
poor as the transparency rules are for publicly traded companies, they shine in
connection with the absence of significant requirements with regard to
privately held firms. The secrecy afforded to family-controlled
mega-corporations such as Koch Industries and Cargill is a serious public
policy problem.
While
companies such as Facebook and Google claim to be sympathetic to the concerns of
their customers about government surveillance, they continue to enjoy a higher
level of privacy. Corporations have been aggressive in asserting First
Amendment rights equivalent to those of natural persons, but when it comes to
the Fourth Amendment, they seem to be ahead of us humans.