Privacy vs Transparency

Author:Jay Purcell - Ivana Rossi
Position:JAY PURCELL and IVANA ROSSI are financial sector experts in the IMF's Legal Department.
Pages:18-21
SUMMARY

Countries must strike the right balance as they combat illicit financial flows

 
FREE EXCERPT
18 FINANCE & DEVELOPMENT | September 2019
Countries must strike the right balance
as they combat illicit financial flows
Jay Purcell and Ivana Rossi
Privacy vs
Transparency
I
n 2011, Pakistan’s nance mini ster gave a budget
speech to the National Assembly, explaining
that the country’s ratio of tax re venue to GDP,
at 9.2 percent, was ranked lower than t hat of
all but 1 of 154 jurisdictions. In a country of 180
million, just 1.2 million people and rms  led
income tax returns.
Widespread tax evasion sta rted at the top; 70
percent of Pakistani law makers had not led returns
that year, the Center for Investigative Report ing in
Pakistan found. So s tiening existing laws a nd pen-
alties would have been a chal lenge. And increased
enforcement would ultimately depend on action
by Pakistani judge s—many of whom had also
neglected to pay their taxe s.
Undeterred, the Ministry of Fina nce took a bold
step. In 2014, it authorized the Federal Board of
Revenue to make public how much income tax
every company and individua l pays each year. is
unusual approach appears to have had an eect;
while compliance remain s low, there is some evi-
dence that it improved as a result of the minist ry’s
transparency initiative. Still, that improvement
came at a price. To shame tax evaders into paying
their fair share —and enable civil society a nd jour-
nalists to hold them to account if t hey do not—all
Pakistani s had to give up some of their privacy.
Around the world, national authorities are
increasingly aware of the value—and cost—of
PHOTO: ISTOCK / GYRO

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