An EU Registry of Corporate Assets Would Be a Digital Boondoggle

The chair of the EU’s parliamentary tax subcommittee is calling for a centralized asset registry—a repository of all forms of wealth held by EU citizens (or at least the wealthy ones), as well as corporations, partnerships, and other business entities.

The proposal has sparked a lot of controversy, and with good reason. The purpose of this digital monstrosity is supposedly to track terrorists, money launderers, and tax cheats. But why would terrorists or money launderers ever report their assets to the registry? Meanwhile, honest citizens would be burdened with detailed reporting obligations, akin to a second annual tax return, if not worse.

The registry supposedly could be accessed only by “competent authorities.” But that phrase covers thousands of government employees. We know from IRS experience that sensitive data can leak to the media.

If leaked, the registry data would be a goldmine for claims by disaffected spouses and other litigants. Once they reported assets to the registry, honest citizens could become vulnerable to a host of predators if the data got into the wrong hands.

Tax Subcommittee Chair Pasquale Tridico, a member of The Left grouping in the EU Parliament, appears principally motivated by his quest to tax multinational corporations. He particularly wants to enforce OECD Pillar Two, which calls for a 15% minimum tax on the profits of multinational corporations, wherever they’re earned.

His argument seems to be that the centralized asset registry would enable European tax authorities to discover hidden assets and earnings stashed in far corners of the globe. This is far-fetched. Instead of creating a new mountain of data, tax authorities should enlarge their audit teams.

The Organization for Economic Cooperation and Development’s Pillar Two counts among the bizarre features in today’s tax policy world. So far, more than 140 countries have subscribed to the proposal, but only 45 have introduced or adopted implementing legislation.

Most of them are in Europe. Coincident with the call to join Pillar Two, the big players in the world economy—the US, EU, and China—are showering select multinational corporations with generous subsidies. The combination amounts to the government picking winners and losers on a grand scale—not only among industries, but also countries.

The Biden administration enacted the Inflation Reduction Act to provide generous subsidies for almost everything in the green economy—solar, wind, electric vehicles, batteries, and more. It also passed the Chips Act extending subsidies to semiconductor firms. The EU launched Airbus with subsidies and is now moving its sights to semiconductors and electric vehicles. China has a long history of subsidizing steel production and is now channeling public money to solar, wind, semiconductors, batteries, and electric vehicles.

Smaller countries have little to no hope of attracting slices of semiconductor, electric vehicle, solar, wind, or nuclear industries by offering subsidies, for the simple reason they don’t have the requisite market size or workforce skills. But by offering low and simple business tax systems, they can attract slices of mid-tech industries, such as household goods or legal services. They also can serve as intellectual property repositories for patents, copyrights, and trademarks.

European proponents of Pillar Two seem to want to put an end to this sort of tax competition from smaller countries. Good luck—the OECD’s Pillar Two document is 69 dense pages, making it a gift of new business to the big accounting firms. They have rushed to provide explainers and consulting services to multinational corporations and affected countries.

In those 69 pages are loopholes for wage subsidies, investment tax credits, and other incentives that countries can offer multinationals if they raise the nominal tax rate to 15%. Pillar Two, even if adopted by all 140-plus countries (which seems unlikely) will alter the form of tax competition from simple and efficient low tax rates to more complex and less efficient subsidies.

Meanwhile, the centralized tax registry proposal hopefully will die of its own weight. Applied to citizens, it’s a massive invasion of privacy. Applied to corporations, it will create an enormous amount of data but do little to aid tax enforcement.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Gary Clyde Hufbauer is a nonresident senior fellow of the Peterson Institute for International Economics, a financial policy think tank.

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