New international standards aimed at improving global tax transparency with 14 guiding principles have been published by the General Assembly of the Global Initiative for Fiscal Transparency (GIFT).

GIFT was founded in 2011 as a multi-stakeholder action network to advance fiscal transparency, participation, and accountability in countries around the world. The basic motivation for establishing it was that the overall state of budget transparency around the world is poor.

In a statement on 15 August, GIFT said it had sought the expertise of University of Sheffield academics to explore ways to govern transparency in taxation globally, supported by the International Monetary Fund, the World Bank and the Organisation for Economic Co-operation and Development.

The new global principles (set out further down below) are designed to improve the legal, regulatory, and institutional frameworks that make up national tax systems, it said. 

In order to bolster public trust and work towards full tax transparency, the experts identified that the UK should require annually published tax policy documentation and independently audited tax accounts.

The standards are made up of 14 new guiding principles based on research by University of Sheffield experts and are intended to help policymakers and a range of civil society stakeholders make more informed choices on tax and achieve a greater understanding of the social and public benefits of their tax system. 

Professor Richard Murphy, from the University of Sheffield's Department of Accounting and Financial Management and Professor Andrew Baker, from the Department of Politics and International Relations, were approached by the Global Initiative for Fiscal Transparency (GIFT) to help draft the principles.

Baker said: "The Principles are really about creating the institutional mechanisms, processes and information sources societies need to debate and reflect on how to build, nurture and invest in their tax systems so they become effective powerful instruments for dealing with pressing challenges such as responding to climate change, mitigating inequality and maintaining vital public services."

Murphy said: "For 20 years civil society demands for tax reform have focused on abuses by large corporations and the very wealthy, with a particular focus on abuse facilitated by opaque tax havens. This has been appropriate, but the time has now come to consider the transparency of domestic tax systems as well.

"The GIFT Principles on Tax Transparency are based on the assumption that a government is accountable for its actions. Taxing people is one of the biggest impacts a government has on its population. In that case providing transparent data on why tax is charged, who it is charged on, how much is paid and with what outcome (including a comparison of those planned and actual results) is fundamental to public debate on tax, economics and social policy."

GIFT has already written principles on transparency in public expenditure, and on inclusive and participatory budgeting.

Juan Pablo Guerrero, Network Director of GIFT, explained how this third set of principles for tax transparency might deliver improvements for any country making use of them: "The principles fill a major gap in the global architecture of fiscal transparency rules and aim to provide a robust but flexible reference point for policy makers and stakeholders to develop their own frameworks for taxation.

"They will help to promote informed public debates on tax reforms that will enable tax systems to raise needed revenues more equitably and efficiently."

Murphy added: "The principles were drafted following extensive consultation with multilateral institutions such as the Organisation for Economic Co-operation and Development, International Monetary Fund, the World Bank, national authorities and civil society partners from seven countries.

"Our hope is that these international organisations will use these principles to assist governments in order to improve their tax systems and their accountability. But we also hope governments will adopt them to achieve that goal, while civil society can use them to negotiate the improvements communities want. They are deliberately written to facilitate all of these groups."

The researchers will now be working with GIFT and the international community on how to most appropriately apply and use the principles in different national settings.

Global Initiative for Fiscal Transparency (GIFT) based in Washington DC. GIFT is part funded by the International Monetary Fund (IMF), World Bank and the Organisation for Economic Co-operation and Development (OECD) and works to produce standards and principles that promote open, inclusive and accountable fiscal governance across the world.

The new set of Transparency Principles on Tax Policy and Administration were approved by GIFT's General Assembly at their Annual Stewards Meeting in Bogata, on Tuesday 2 August 2022, in response to consultation with multilateral institutions, national authorities and civil society organisations.
GIFT General Stewards include the IMF, the World Bank, IBP, OECD, and expert tax civil society such as INESC (Brazil), ACIJ (Argentina), CIEP (Mexico), ICEFI, Fundar (Mexico), PSAM (South Africa), Social Watch (Benin), Observatorio Fiscal (Chile), Open Contracting Partnership, and others.

The 14 new Principles 

The new set of international transparency principles for tax policy and administration should
guide policymakers and tax administrators to ensure that:

1. Governments and national authorities should follow procedures that recognize stakeholders have a right to access information to enable them to reach judgements and participate in consultations, about whether a tax system is meeting stated objectives and working in the public interest. (BASIC).
2. Governments should publish clear and measurable objectives for the tax system on a timely basis, usually annually for each budgeting and reporting period. (BASIC).
3. The objectives of the tax system should be supported by timely and detailed projections of future tax revenues for each annual budgeting and reporting period, along with the sources of information and assumptions underlying all estimates and projections. (BASIC).
4. All taxes and their administrative framework should be codified in law, with changes in policy and substantive administration being made through a legislative process, that involves appropriate meaningful institutionalized consultation with stakeholders and civil society.(BASIC).
5. Taxpayers should be able to access clear, free and accurate information and advice that will maximize their ability to comply with the tax laws of a jurisdiction. They should also have the right to access a clearly set out appeal process and redress mechanism in relation to any liabilities, or judgements against them, which they believe to be incorrect. (BASIC).
6. All taxpayers have a right to confidentiality with regard to their affairs unless specific circumstances require otherwise. (BASIC).
7. Governments should provide the contextual information needed to place taxation within a broader fiscal, economic, and social framework. (BASIC/INTERMEDIATE).
8. Governments should publish a set of accounts on taxes collected at least once a year that includes a discussion of major deviations from budgeted amounts by type of tax, with reference to numerical data and previously published budgets, as well as commentary on whether the tax system has successfully met its stated objectives in the light of this data. (BASIC/ INTERMEDIATE).
9. Tax administration - government relations should be subject to the rule of law and tax administrators should be accountable to executive and or legislative branches of government. (BASIC/ INTERMEDIATE).
10. Where appropriate, governments should collaborate with international and regional financial institutions and tax administrators to meet their international reporting obligations. More generally they should seek to engage with international efforts (inclusive of civil society) to increase revenue transparency, improve administrative practice and participate in research on
the impact of tax policies across countries and regions. (INTERMEDIATE).
11. Governments should evaluate and report on the extent to which taxes that are legally owed go unpaid, as a first step in preparing a tax gap estimate (see principle 14). (INTERMEDIATE/ADVANCED).
12. Governments should seek to examine the impact of and publish information on the amount, sectors and beneficiaries of tax incentives - such as reliefs, allowances and exemptions, in terms of their rationales, costs, benefits and effectiveness.(INTERMEDIATE/ ADVANCED)
13. The data underpinning tax transparency should be subject to verification by an independent agency that audits, evaluates, and reports on the accuracy, quality and fairness of that data. (ADVANCED).
14. Governments should aspire to work with international bodies to periodically evaluate the performance of their tax system by applying advanced assessment tools such as tax gap analyses and tax spillover assessments, to enhance their own and stakeholder understandings of the risks and vulnerabilities within the tax system, and to inform potential reform debates. (ADVANCED/ ASPIRATIONAL).