European Tax Returns in Comparison

The Fine Line Between Privacy and Transparency

An increased level of transparency is one of the declared aims of the OECD and the EU in the fight against tax avoidance and fraud. According to experts, the current lack of transparency promotes not only an unfair distribution of the tax burden between companies and individuals but also unfair competition between international and national companies in the EU.

In recent years, a wide range of EU initiatives have been put in place in order to ensure increased tax transparency. At the end of June 2017, for example, the EU proposed an obligation to report questionable and “potentially aggressive” tax deals, which as expected sparked protest on the part of the professional associations affected (such as lawyers, tax advisors, and auditors). This shows that the issue of tax secrecy remains a hot topic in many European countries. Other EU countries, however, apply a more transparent approach to dealing with the tax data of their citizens and companies.

 

Transparency as a Fundamental Pillar of Democracy

In the UK, a similar arrangement is already in place, as is the case, incidentally, in many other Anglo-Saxon countries.

In Sweden, the model country for transparency, they take the matter even one step further, as the tax data of all Swedish citizens and corporations are published unsolicited every year. In this way, everyone can see exactly what taxable income from earnings and capital and even the amount of assets and liabilities a neighbor or a particular company has.

This level of transparency is based on the so-called principle of public access, which the Swedes see as a key building block for democracy, as anyone can request information on administrative operations. Perhaps this approach is conceptually deeply rooted in Puritanism, based on the saying “If you have nothing to hide, there is nothing to fear”, for other Nordic countries handle the personal data of their citizens in a similar way. Norway, for example, also openly deals with tax data, and Denmark assigns a personal number to each individual, to which all information as well as operations, both private and official, are linked.

 

Transparency vs. Protection of Privacy

The situation is quite different in German-speaking countries, where privacy is given a much higher priority than the public interest. In Germany, for example, tax secrecy is constitutionally protected and considered part of general personal rights.

Austria also provides for tax secrecy, yet with some exceptions. For example, it is revoked if it facilitates tax proceedings, if there is a compelling public interest, or if the person does not have a legitimate interest to protect his or her data.

In Switzerland, in turn, tax secrecy is generally defined as “qualified professional secrecy”, which obliges anyone involved to keep all information confidential. However, there are considerable differences between the Cantons. Some even publish tax registers for a limited period – whereas the information merely contains so-called tax factors, that is, the taxable income and assets of persons or the earnings and equity of a company.

 

Conclusion

To sum up, it can be said that there are still significant cultural differences within Europe on the issue of tax transparency. For the politicians in Brussels, it will be a long and bumpy path to reach an agreement on a uniform transparency regulation.