The concept of the taxparent mark is simple: a company which would make its entire corporate ownership structure, up to the ultimate beneficial owner, and its global effective corporate tax rate public on the internet website will have the opportunity to get the taxparent mark. Who gets the TAXPARENT mark will have a competitive advantage of a better reputation with the consumers.
Each company which will want to get the TAXPARENT mark will simply enter its corporate ownership structure into prepared on-line template; in addition, in respect of each company within the structure it will indicate the amount of effective corporate tax paid in each jurisdiction. Then, it attaches the justifying documents, for example, a certificate from the companies registry or the published accounting documents. From this information the web application will create corporate ownership structure and compute the global effective corporate tax rate.
Subsequently, the application will generate a TAXPARENT mark for the corporation indicating the amount of global effective corporate tax rate and the number of stars reflecting the amount of corporate tax paid in all the EU countries. The company will put this e-trustmark on its website. The e-trustmark will be interactive: when the visitor clicks on it the entered corporate ownership structure and the gloval effective corporate tax rate will display to the visitor. The TAXPARENT mark will be granted for the period of one year (until the publication of the accounting documents in the next year).
First, TAXPARENT mark will bring a competitive advantage to companies from voluntarily disclosed corporate structure and the effective corporate tax rate. To get the mark will be easy for the small companies with simple corporate structures. It will be slightly more time-consuming for larger corporations with more complex ownership structure. Yet, getting the mark will be non-discriminatory and proportionate to the size of the company. If the smallest can get a competitive advantage, then the bigger will follow thanks to a simple business envy.
Second, TAXPARENT mark will bring a simple and understandable means for the consumers how to differentiate between clean and responsible companies form the opaque and tax avoiding ones. Consumers understand and appreciate those marks from which they can directly elicit what they mean: from the TAXPARENT mark they will understand that the company is transparent and how much corporate tax it pays. Hence, consumers will be incited to buy products of companies with TAXPARENT mark which will create the virtuous circle since, in turn, it will attract businesses to get this mark.
Third, event if it is not possible to expect that tax avoiding companies with secret owners would become voluntarily taxparent, TAXPARENT mark has a potential to create an informal ethical standard which would distinguish transparent from non-transparent companies. If this ethical standard got extended also to large multinational corporations whose global effective corporate tax rate is as a result of profit shifting low (for example, 4 %), would desire to get the TAXPARENT mark, they would have the possibility to make a top-up payment to the EU budget (it would be a de facto tax of offshore profits).
Fourth, and probably most important, authorities granting public funds could start to require that private companies which apply for public contracts and grants have the TAXPARENT mark. The conditions for obtaining TAXPARENT mark are non-discriminatory and in compliance with public procurement laws. This would again trigger a virtuous circle: authorities would grant public monies only to companies whose ownership structure, up to the ultimate beneficial owners, would be publicly known (no minister or public official would dare own company which would receive public monies) Thus corruption and state capture would be reduced.
Fifth, companies with taxparent mark will be easy to control since their global ownership structure as well their global effective corporate tax rate would be made available on the internet. For example, a Czech company with a TAXPARENT mark and high revenues in the Czech Republic and a low amount of tax paid owned by a parent company from Bermudas with high profit and zero corporate tax paid (corporate tax rate on Bermudas is 0 %), would be a clear candidate for a thorough financial investigation of compliance with transfer pricing rules.
