When a leak causes the downfall of one Prime Minister and forces another to publish his tax returns – quickly followed by a clutch of his counterparts doing the same – it’s safe to say we are in the middle of more than a typical media frenzy. The political repercussions from the publication of the Panama Papers are being felt from Iceland to Downing Street and from China to Argentina.
Here in the UK, it is now hard to see how anyone running for high office will in future be able to avoid full transparency over their tax affairs. Tighter restrictions on the way wealthy individuals move money across borders to reduce their tax burden seem inevitable.
But, while we may be transfixed by the temporary discomfort felt by David Cameron and a host of other high-profile individuals around the world, the more fundamental impact of the biggest corporate leak in history will, I believe, be on the way British business behaves. For the Panama Papers have shown conclusively that the age of business secrecy is coming to a close. The internet has killed it. Companies had better prepare for a new era of transparency, or pay the price not only in government interventions but also a consumer backlash.
We can’t say we have not been warned. The last few years have shown how supposedly private data can now be instantly and widely shared across the web, with the law providing no protection. If even the US Government is powerless to prevent massive leaks of confidential and highly sensitive information, then companies had better stop putting their head in the sand. The exposure of cosy tax deals between Luxembourg and a host of multinationals, back in 2014, was just a taste of what the future holds.
But smart companies can see this change brings opportunities, rather than just threats. Consumers now rank “honesty and transparency” alongside price and quality when considering whether to buy a product or brand. The firms embracing this are seeing their market share increase.
This new revolution is led by the tech sector, for whom transparency was not an afterthought, but central to how we operate and what we offer. Rather than being resistant to openness, digital entrepreneurs see the sharing of information with consumers as a key driver of their business.
We can see its transformative impact across a growing number of sectors. Uber, Airbnb, and eBay have all developed sophisticated “feedback” settings to publish the behaviour of their users, showing consumers the track record of other people in their community.
Funding Circle has created an open methodology for loan applications, and clear performance and bidding data to explain how their system works. Transferwise are opening up pricing for international money transfers: an area which up until recently was cloaked in secrecy.
At Property Partner, every month we share an extraordinary level of detail about the housing market, our investment performance and measures of liquidity in our resale market. This approach is what make us – and the many other companies with a similar approach in their own sectors – such a radical departure from the past.
Some tech companies arguably buck the trend: Google and Amazon appear to have somewhat opaque tax affairs, for example. But overall the drive towards openness and transparency is exciting and it is the internet that is making it possible.
And that’s the wider lesson from the Panama Papers: rather than the soap opera of individual cases. Right now the debate is centred on what Government should do to ensure wealthy individuals pay their fair share of tax and whether politicians should be required to publish their tax returns. Yes, the EU is putting forward proposals to force larger companies to declare turnover in each member country and how much tax they pay.
But, it is market competition that is always going to be the main driver of openness and transparency: and we should not forget it. In sector after sector, we are already seeing how new entrants are shaking up markets, by sharing data, and informing their customers rather than keeping them in the dark. Transparency is the new normal. The future belongs to the businesses that embrace it.