Governance and Global Affairs Blog

The Paradise Papers and the Presumption of Publicity

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The Paradise Papers and the Presumption of Publicity

Most of the material in the Paradise Papers contains scarce to no evidence about illegal activities. The main moral problem? The Paradise Papers violate the presumption of publicity.

On November 5, 2017, a small portion of about 13.4 million documents were released by the International Consortium of Investigative Journalists.[1] The documents contain information about secret accounts held by various individuals, corporations and countries in offshore tax havens. The documents have come to be called the Paradise Papers. Unlike the documents released one year and a half earlier in the Panama Papers, most of the material in the Paradise Papers contains scarce to no evidence about illegal activities. Though often pointing to fiscal schemes that look unfair and that are often enjoyed by privileged individuals – including state officials or showbiz celebrities – there is nothing clearly illegal or criminal about the disclosed arrangements.

Dutch Paradise?

The Dutch government also became part of the public debate occasioned by the Paradise Papers. The government was criticized for enabling a considerable number of fiscal rulings with various multinational corporations, most notable among which are Procter & Gamble, Nike or Uber. Much to the chagrin of various Dutch government officials, it was shown that at least one of these corporations came to enjoy a substantial tax break through a process that was procedurally flawed. A lot of the debate in the Dutch media, as well as in Dutch politics, focused on the fact that the fiscal advantages benefiting Procter & Gamble were single-handedly decided by a tax inspector from Rotterdam, and thus failed to follow the procedures that come with such special measures. Others (some of them national public officials) complained about the unscrupulous multinationals that come to the Netherlands for the single purpose of benefiting from advantageous taxation. Still others (for instance, the European Parliament) denounced the unfair gains the Netherlands is getting from its special fiscal arrangements as compared to other countries in the EU.

State Policies and Publicity

There might be something to each of these complaints, but I think it’s somewhat surprising that they all miss what seems to be the obvious moral problem with the Dutch special fiscal rulings in particular and with some of the other tax schemes (for example, those that involve Queen Elizabeth II or music stars like Bono). The main moral problem, as I see it, is that all these special arrangements were carefully kept secret from the wider public. In other words, what makes the Paradise Papers morally disturbing is that they so blatantly violate what can be called the presumption of publicity. The presumption of publicity, in short, is the idea that a state’s laws and policies should be public by default, in the sense that the information about how they were decided and what their (at least general) content is should be made available to the members of the public. The presumption of publicity also applies to the actions of individuals (or groups of individuals, such as corporations) that are expected to have a significant impact on the wider public. Thus, for example, whether I am paying my taxes or not (which is money that goes to the community as a whole) or whether I am enjoying any tax benefits should, in principle, be public information.

Now, the presumption of publicity is not absolute. There are cases of state practices that are better kept secret, such as intelligence information which, if made public, could seriously undermine the security of the state. But we need to have a sound reason for defeating the presumption of publicity (like security in the example above). The problem with the secret tax rulings disclosed by the Panama Papers is that no such sound reason seems to be available. This is to say that there is no good reason why some individuals or multinationals should enjoy the kind of fiscal secrecy they do. For most of us, the taxes we pay are public not in the sense that people can consult the particulars of our tax records (often, they cannot), but in the sense that, knowing what income group we fall into, it’s easy for pretty much anyone to infer the amount of tax we pay. There is no (big) secret there.

What changes with the practice of special tax treatments is that this general publicity presumption that works for all the rest is unreasonably defeated in favor of some. Some of us enjoy a special treatment and the rest of us (members of the public) are kept ignorant about it. In that sense, differences in the degree of publicity of the fiscal policies we are subject to generate a form of unequal treatment. Note that the unequal treatment is not that some of us enjoy certain fiscal advantages. Though some advantages are unfair, there might be others we have good reasons for – say, attracting investors or valuable human capital. Rather, the problem with secret fiscal rulings here is their very secrecy, namely, that the advantages of some are made public, while the advantages of others are not and that there is no morally good reason for that. As such, we are dealing with a wrongful rejection of the presumption of publicity.

One More Problem Besides Secrecy

Note, furthermore, that the absence of publicity might be problematic not only because it gives rise to unequal treatment. It might also be problematic in that it fosters a context where some people come to incur unjust burdens. One such unjust burden is that imposed on those low-ranked officials who have to actually enforce the morally dubious arrangements and, in addition, are legally prohibited to talk about it outside their work. To see what is wrong with this, imagine that your employer asks you to do something you consider to be unfair and at the same time forbids you to talk about it to anyone else. Another unjust burden is the one that invisibly falls on the shoulders of citizens who (ignorantly) continue to buy the products of companies whose behavior they might otherwise condemn.


[1] The documents were said to be obtained from the German journal, Süddeutsche Zeitung, which in turn declared it obtained them from John Doe (the same anonymous source responsible for the Panama Papers leak).

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