Matthew Lester: FIFA, HSBC scandals will improve corporate governance

When I first heard the acronym BEPS ‘Base erosion and Profit Shifting’ I thought ‘Same old stuff, this is just the old war of the tax authorities against transfer pricing revisited.’

So in 2013 the OECD gathers rafts of tax nerds together in Paris to start a war on the tax planning of multi-nationals. And they start writing reports that are enough to blow the mind of any student of the tax game. You need a bottle and a big joint to wade through just one report. And there are going to be reports covering 15 aspects if international tax planning.

The OECD is planning an international tax convention in an attempt to thrash out a standardized set of rules that represent best international fiscal tax practice. But the OECD does not pass the laws, so one can only guess what the politicians will do with their work. But that’s not the issue

The anti-tax planning lobby have generally been viewed as extremists. Most executives seek comfort in those old lines of Lord President Clyde’s ‘subjects are free, if they can, to make their own arrangements so that their cases may fall outside the scope of the taxing acts. They incur no legal penalties, and strictly speaking, no moral censure, if, having considered the lines drawn by the legislature for the imposing of taxes, they make it their business to walk outside them.’

But I think this is all changing very quickly.

The 2015 attacks on HSBC and FIFA have demonstrated that all multinationals are now at real risk of public humiliation. Nothing is safe anymore. It just takes one whistle blower to step forward and the proverbial hits the fan. You cannot even hide away in a hotel in Switzerland.

I don’t think it’s the threat of monster fines and settlements that are frightening multinationals. It is more a matter of public reputation that’s now at stake. In the case of Sepp Blater I am sure that FIFA wouldn’t give two hoots at the cost and inconvenience of enquiries. Those who have benefitted will probably still enjoy a very comfortable retirement rather than a stint behind bars. And there is a far greater possibility that Sepp Blatter will end his days in an expensive 6X2 box than a 4X4 cell.

But when principle sponsors and advertisers come under pressure to withdraw their cash from FIFA, well, that could rock the very backbone of the beautiful game. And the likes of Nike must be thinking very hard about that right now.

Perhaps King III, 2009, was ahead of it time, ‘Reputation is everything.’ I think the very public investigations of 2015 are going to do more to improve corporate governance and reduce the extent of international tax planning than rafts of new laws and regulations.

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