Handle with Care: Transparency as a Means to Restore Trust in Taxation

36 Pages Posted: 23 Nov 2020 Last revised: 24 Feb 2021

See all articles by Hans Gribnau

Hans Gribnau

Tilburg Law School

albert van steenbergen

Fiscal Institute Tilburg; Tilburg University

Multiple version iconThere are 2 versions of this paper

Date Written: October 25, 2020

Abstract

As a result of the 2008 financial crisis government had to make substantial cuts in public expenditures. Austerity measures can be considered to be one of the explanations behind a decreased confidence in the government. Furthermore, several tax-related scandals and leaks (for example the so-called Panama Papers and Paradise papers) got much media coverage. The message often was that multinational corporations are not paying their fair share, compounding Treasury’s condition, and tax authorities are too cosy in their dealings with these multinationals. As a result, trust in government, the tax administration in particular, the (international) tax system and large (multinational) corporations diminished. Many actors see greater transparency of the tax system as critical to rebuilding trust in the international tax system – disclosure providing information evidencing that multinational corporations pay a fair share of taxes.

Since the demand for increased transparency regards tax authorities, on the on hand, and large corporations, on the other, we distinguish between two types of trust. Institutional trust refers to trust in institutions, such as the tax authorities and social or interpersonal trust is about trust in other (corporate) members of society. Since trustworthiness is a prerequisite of trust, we’ll investigate how transparency can promote trustworthiness of tax authorities and multinationals.

The first part this paper offers theoretical considerations on various elements, types, and paradoxes of transparency and trust. Subsequently a brief analysis is made of several recently introduced hard and soft law initiatives which are aimed at greater transparency to promote trustworthiness of tax authorities and multinationals. The second part comprises a study by the Dutch tax authorities on transparency. This empirical research is focused on the question how the Netherlands Tax and Customs Administration (NTCA) can deal with the increasing demand for transparency towards society. This second part focuses on the subject of transparency in regard to the particular context of tax administration and tax enforcement.

Keywords: transparency, institutional trust, social trust, interpersonal trust, trustworthiness, tax authorities, multinational corporations, mandatory disclosure, voluntary disclosure, rulings, country-by-country reporting

Suggested Citation

Gribnau, Hans and van steenbergen, albert, Handle with Care: Transparency as a Means to Restore Trust in Taxation (October 25, 2020). Available at SSRN: https://ssrn.com/abstract=3718692 or http://dx.doi.org/10.2139/ssrn.3718692

Hans Gribnau (Contact Author)

Tilburg Law School ( email )

Tilburg, 5000 LE
Netherlands

Albert Van steenbergen

Fiscal Institute Tilburg ( email )

P.O. Box 90153
Tilburg, DC Noord-Brabant 5000 LE
Netherlands

Tilburg University ( email )

P.O. Box 90153
Tilburg, DC Noord-Brabant 5000 LE
Netherlands

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