Menu
Tax Notes logo

Has Public Opinion Moved the Political Needle on Corporate Tax Avoidance?

Posted on Nov. 29, 2021
Jeroen Lammers
Jeroen Lammers

Jeroen Lammers is an external PhD candidate in international tax law at the University of Amsterdam and a lecturer in tax law at the Copenhagen Business School. He is also a partner with Dr2 Consultants Copenhagen.

In this article, Lammers argues that media analysis and Google Trends data both indicate that public opinion has not been the primary reason why governments have taken legislative action to curb corporate tax avoidance.

Many assume a direct causal relationship between public opinion and political action taken to fight and prevent corporate tax avoidance.1 This article tests that assumption, finding instead that this causal relationship might be more complicated.

This finding is based on two important observations. First, news coverage on corporate tax avoidance has significantly waned over the last four years. Although from 2011-2015 the number of newspaper articles on corporate tax avoidance rose sharply, the number fell just as sharply after 2016. Given the amount of legislative action and international debate on corporate tax avoidance between 2017 and 2020, news coverage appears to have decreased more rapidly than one might expect.

Second, Google Trends data on internet searches relating to tax avoidance do not line up with the focus of news reporting on corporate tax avoidance. There appears to be a disconnect between what people have been most interested in and what newspapers have been writing about. This disconnect appears to be consistent throughout the examined period and across the examined countries, irrespective of economic upswings or downturns.

These observations indicate that over the last 15 years, corporate tax avoidance may not have been at the top of the general public’s list of tax issues they care most about. Instead, the data suggest that the general public’s interest is piqued primarily in response to tax scandals involving famous individuals who were caught hiding assets from the tax authorities.

Finally, as a short case study, the article looks at elements of the political decision-making process of the EU anti-tax-avoidance directive (ATAD (2016/1164/EU)). ATAD is relevant in this respect, because the International Consortium of Investigative Journalists (ICIJ) published the Panama Papers right in the middle of the political decision-making process. This analysis reveals that public opinion has not been the most important reason for the adoption of these policies, which are aimed at curbing tax avoidance by multinationals.

I. Aim and Method

This article provides insight into the causal relationship between public opinion on corporate tax avoidance and government action to prevent it. The findings are based on an analysis that consists of multiple parts.

Section II establishes a framework by which to assess the dynamic between public opinion and the news media. There is a brief description of research on public opinion and how public opinion is formed. Section II also examines factors typically considered in assessing newsworthiness and how those factors might affect public opinion.

Section III includes a media analysis. This discussion aims to provide insight into how the media reported on corporate tax avoidance issues across different European countries. This section also considers the prominent actors in the international tax policy debate.

The media analysis includes an examination of approximately 9,000 individual newspaper articles spanning more than 15 years in six different European newspapers.2 Regarding the content of the articles, a qualitative assessment has been made of the specific subjects of the articles, the various actors involved, the perspectives from which the articles were written, and how the general tone of voice developed.

Section IV consists of an analysis of Google Trends data. Research (by Google) suggests that there is a correlation between the lifespan of news stories and search interest in the subject.3 The analysis attempts to link search interest to specific topical tax events at the time of those searches, and then it tries to determine whether this corresponds with the emphasis of the news stories on tax avoidance in the media in that same period.

II. Public Opinion and News Media Reporting

If public opinion has led to political action to prevent corporate tax avoidance, then it is important to understand what public opinion is and how public opinion is formed. In this analysis, it is assumed that the media plays a key role in how public opinion concerning tax matters is formed, given that, except perhaps for tax experts, most people likely receive their information on a subject such as corporate tax avoidance through news media.

A. Academic Views on Public Opinion

Public opinion is formed in several ways. For instance, Jürgen Habermas views public opinion as a rational, information-based phenomenon that is formed in the public sphere based on a rational exchange of information.4 While that is true, the more important question seems to be whether this rational exchange of information can always happen. For instance, Habermas expressed concern that not everyone may have sufficient access to this public sphere. He further noted that public opinion may be overly influenced through lobbying and similar persuasive methods.

Elisabeth Noelle-Neumann views public opinion in terms of social mechanisms. She contends that, in terms of public debate, those confident of victory typically speak up, while losers tend toward silence.5 Accordingly, in her view, a rational exchange of information is unlikely to occur — as information potentially important to forming public opinion might be absent from the analysis.

James Surowiecki deems it equally problematic if either one specific voice comes through much louder or one specific voice remains silent. He states that, under the right circumstances, groups can reach remarkably wise decisions collectively, even when the group as a whole is not especially well informed or rational.6 He stressed the need for diversity to ensure sufficient variance in approach and thought process, and to prevent such factors as a feeling of belonging, peer pressure, herd instinct, and similar constructs (referring to a “bubble” mentality in which other people’s expectations can change an individual’s own values and behavior) from overly influencing the results.7

Denis McQuail approaches public opinion as an objective social fact, which generally refers to the aggregate sum of individual opinions embodied in social media accounts. On this basis, individual reactions to news, when viewed in the aggregate, should provide a reasonable approximation of public opinion and consensus.

However, on this issue, McQuail reflects on the changing nature of journalism. According to him, the rise of civic or public journalism means that journalism begins to take on a purpose “to improve the quality of civic life by fostering participation and debate.”8 In this vein, journalism, with a purpose of disseminating information, transforms into journalism with a purpose of encouraging and facilitating conversation.

One could argue that, as the main goal of journalism moves from information to conversation, there is a risk that the media may no longer truly reflect objective social facts — as some arguments or opinions or points of view may be featured less prominently.

B. Academic Views on Newsworthiness

If we accept that access to news is an important instrument for influencing public opinion, the manner in which news stories are selected is important to the consideration of how public opinion develops. This is especially true as we move from “journalism of information” to “journalism of conversation.”

There are competing academic views about why some news stories are deemed newsworthy while others are not. Johan Galtung and Mari Holmboe Ruge wrote an influential paper in 1965 in which they presented a system of 12 factors that together define newsworthiness. They found that negative events draw more attention than positive ones.9

In 2001 Tony Harcup and Deirdre O’Neill noted that some articles are newsworthy even when they do not fulfill any of the 12 factors identified by Galtung and Ruge. For example, other factors, such as popular subjects like celebrities, animals, humor, and sex, may be involved.10

Pamela Shoemaker and Akiba Cohen presented a theory in 2012, which states that there are, in fact, only two distinct factors that make something newsworthy: deviance and social significance,11 with deviance in this context referring to how far something is removed from “normal,” and social significance referring to how an event might affect the future development of a society.

Hal Pashler and Gail Heriot commented that these studies did not consider possible intrinsic partisan or political biases.12 In 2018 they found that:

Judgements of newsworthiness — specified as importance to a hypothetical newspaper readership — are contaminated by an ideological bias: news stories that offer good ‘ammunition’ for the views of the rater are assigned a higher news value than those providing ammunition for the opposing view. The bias appeared slightly greater for those reporting an interest in politics and — for unknown reasons — slightly greater for those characterizing their political views as liberal.13

It appears that a story is sometimes deemed newsworthy irrespective of whether that news story fits any given framework. In fact, the research suggests that a story may be deemed newsworthy because the news media outlet believes the story should be regarded as newsworthy, an analysis historically informed by the news media outlet’s political beliefs and preferences.

C. What Is ‘Public Opinion’?

As the foregoing discussion suggests, it is difficult to fully assess the opinion of the general public. Importantly, what may typically be regarded as public opinion might not be an inclusive representation of all available voices and opinions. Furthermore, academic views on newsworthiness suggest that the available information is not offered value-free. Nor is it always strictly intended for a rational exchange of information.

Communication theory recognizes that news media often use specific strategies to “highlight” certain subjects. Through agenda setting, priming, and framing, news audiences can be influenced to think in a certain manner about specific subjects.14 Priming and agenda setting rely on the belief that a subject (and any associated political assessments) is more easily recalled if it appears more often in the media.15 Framing, by contrast, addresses how the public understands a complex subject.16 It works by boiling it down to a single, provocative message by which individuals can evaluate a wide range of isolated and often complicated facts.17 Framing can be used to induce news audiences to accept that two concepts are connected in the manner the frame suggests they are.18

Considering how information is presented in the media, the voices and opinions that ultimately form the public opinion may also be inclined to favor a certain political attitude.19 Therefore, information presented as public opinion in news media could very well be the opinion of the general public, but it could also be the collective indignation of a specific group within society. This raises the question how one might attempt to distinguish one from the other.

III. Media Analysis on Corporate Tax Avoidance

As a first step toward answering this question, articles written by various newspapers about tax avoidance are considered. In this regard, it is important to note that this analysis does not aim to evaluate exactly what different actors have been saying. Rather, the analysis focuses on how the different stakeholders talk about the subject of corporate tax avoidance and examines the effect this might have on the debate, in general.

A. News Articles Addressing Tax Avoidance

Of the 9,000 initially discovered articles on the general topic of tax avoidance, approximately 5,150 articles address international corporate tax avoidance. Figure 1 shows how many of these articles each newspaper published per year.20 As illustrated, the number of articles on corporate tax avoidance rose sharply from 2011 and fell just as rapidly after 2016.

A comparable pattern was observed in each individual newspaper. The number of articles in business-oriented newspapers decreased much slower than in newspapers that are traditionally more oriented to the political left. From about 2008 until 2013, these two categories of newspapers each published about the same number of articles on corporate tax avoidance. Between 2014 and 2016, this ratio changed to about 2 to 1; from 2017 to 2020, this ratio increased further to about 4 to 1.

Figure 1. Articles Relating to International Corporate Income Tax Avoidance Per Newspaper

The lion’s share of the articles examined government legislative action. Interestingly, media coverage rarely zoomed in on the actual measures themselves. Even a basic description of the problem or the solution was almost always lacking. Instead, newspapers reported on the political dynamics surrounding a measure or they merely stated that the national government, or the EU or OECD, was “cracking down” or “clamping down” on a certain group of taxpayers.21 Also, there was significant coverage of members in national parliaments as well as coverage of the European Parliament commenting on the actions that sitting administrations were taking.22 Reporting on nongovernmental organizations took up most of the rest of the media coverage on corporate tax avoidance. This reporting usually focused on NGOs either commenting on government action or research reports by NGOs calling governments to action. Often these NGO reports were published either in the run-up to or in the wake of some politically relevant occurrence. Moreover, there was significant media coverage of the tax scandals uncovered by the ICIJ, including the Offshore Leaks, LuxLeaks, the Panama Papers, and the Paradise Papers.

Business reporting focused mostly on the big U.S. tech companies. This was certainly the case in the last five years of the examined period. Although the media initially reported on tax issues across industries, after 2015 media coverage on specific companies almost always concerned one of the big tech companies, or the tech companies as a group (generally described by such names as “tech giants” or “the FAANGs,” referring to Facebook, Apple, Amazon, Netflix, and Google). Furthermore, news coverage on business mostly involved other actors commenting on the tax behavior of the business community.23 Business itself remained mostly silent in the media for most of the examined period.

B. Tone of Voice and Argumentation

The general tone in all the examined newspapers was predominantly negative. Reporting became increasingly more negative over the years,24 and the tone generally appeared to be more negative during economic downturns than during upswings. Overall, more superlatives and stronger adjectives were used over time. Moreover, a visible trend was noted: News reporting focused more on the negative aspects of tax avoidance and increasingly less on the long-term economic impact of actions to combat it.

Over time the main talking points of the different actors shifted. For instance, before 2015 the core messages of sitting administrations focused significantly more on the negative effects of measures to combat tax avoidance.25 After 2015, however, the focus shifted away from macroeconomic concerns toward a message that focused on the need to act as soon as possible to preserve fairness in tax and tax morale.26 Also, there was more focus on how much extra tax revenue would be generated by the measures.27 Possible negative economic effects were more often omitted, shrouded in statistical uncertainty, reasoned away, or denied.

Elected officials who were not part of sitting administrations also became more focused on the need for action to curb corporate tax avoidance over time. These actors often were presented in the media as commentators on the measures that were on the table, instead of as co-legislators.28 Prevalent in their message was the view that the action taken by the sitting administration (or international organization) was “too little, too late,” or that the actions were nothing more than window dressing. 29 Interestingly, these actors seldom suggested concrete alternative measures.

Before 2011 most of the NGO media messages suggested that corporate tax avoidance was problematic for developing countries.30 By the end of 2011, NGOs started to zoom in on how public services in developed economies were suffering from multinationals not paying tax in the countries where much of their revenue is generated.31 For example, UK Uncut, which describes itself as a “grassroots movement taking action to highlight alternatives to austerity,” claimed the U.K. government proposed spending cuts to public services because global brand shops in major shopping areas in the United Kingdom did not pay their fair share in tax. This change in focus allowed NGOs to enter the media debate from different angles using different strategies (for example, by polling people to show that the public at large were asking the government to take action to curb tax avoidance and by demonstrating that this percentage of people was growing over time).32

The business community appeared to stay out of the media. When they did comment, their messages until 2016 were mostly on the uncertainty of the actual size of the problem. They tended to point out that tax avoidance was the product of targeted government policies. They further noted that the economic effects of measures to combat tax avoidance caused one to question whether the cure could be more economically damaging than the actual disease.33

After 2016 a much more understanding tone regarding the need for action is observed.34 This suggests that business had accepted that implementation of the measures was certain. Or perhaps business thought that a more understanding tone might be the better strategy to influence the decision-making process at the level of the individual, country-specific measures. When commenting on concrete measures, business would still mostly warn against the adverse economic effects of that measure.35 Also, there was still significant pushback from tech companies specifically.36

C. Disappearing Media Attention

Interest in any news story diminishes over time. The analytical framework further suggests that there is less interest in corporate tax avoidance as the subject becomes less contested. The subject of tax avoidance and the need to take action has been embraced by international intergovernmental bodies and national governments. In fact, these actors have been involved in technical work related to further development of the measures outlined in the OECD’s 2015 final reports on base erosion and profit shifting. This means that, although much is happening, it could be increasingly difficult for most people to relate to or identify with these developments.

Also, the shock value of the problem of tax avoidance appears to have waned significantly. This is partly caused by the difficulty in translating the actual effect of tax avoidance to something that people can relate to individually. In many news reports, the impact is illustrated as an aggregate number representing the amount of tax revenue lost. However, these numbers tend to mean very little for the micro-level understanding of a news consumer. This means that subsequent tax scandals might just not be as newsworthy as the first one. Moreover, it could be that the latest ICIJ publications are just less savory than the previous ones. The Pandora Papers are a good example. In its most recent publication, the ICIJ states that it “unearthed offshore dealings of 35 current and former world leaders and more than 300 other current and former public officials and politicians around the world.”37 However, several of these identified persons have commented that these investments have always been included in their tax statements. Also, quite a few of these investments date back to 2009. Therefore, one could argue that the aim of the Pandora Papers was not necessarily to expose famous individuals cheating tax authorities, but to instead serve as a confirmation that the investment culture of today is much different from the one that existed years ago.38

News on tax avoidance might not be “new” anymore — the issue may be less contested, and the complexity of the subject matter may make these stories less newsworthy. On this basis, one would expect media attention to decline. However, there is a question whether these developments can reasonably explain the rate at which media reporting decreased.

One could argue that this decline happened faster than one might have expected. Throughout the examined period, most news coverage on tax avoidance was on legislative action by governments, which increased after 2016. The continuous discussion at the international level, increased legislative action, and judicial decisions, such as state aid cases, should have served to keep the subject timely and current.

Throughout the examined period, reporting on corporate tax avoidance was not highly detailed. Instead, the news coverage primarily highlighted the political dynamics surrounding the proposed or adopted measures. There is little reason to assume that the political dimension no longer warranted newspaper interest after 2016. For instance, there were several political debates between 2017 and 2020 over the OECD proposals on the unified approach and digital services taxes. Given the political dynamic surrounding legislative activity between 2017 and 2020, one would have expected that news reporting would have stayed at a higher overall level during the last few years.

The analysis also shows that all actors in the international tax debate — with the exception of the business community — actively framed the importance of this debate for individual citizens. Governments and NGOs essentially use a similar argument: Everyone would have to pay less in tax (or get better public services) if multinational corporations would just be required to pay their fair share. Framing the issue in this manner may bring the subject closer to home for most people, thereby making these news stories more relevant and easier to relate to. This active framing of the discussion in the media should have kept the subject of tax avoidance newsworthy, and in fact could even have increased its newsworthiness.

The relevance and relatability of the news stories might have been boosted further by the unprecedented negative impact on economic development in 2020 because of COVID-19. In fact, COVID-19 has had a direct impact on the tax policy debate, as the IMF, the European Commission, and national governments have said that companies need to abide by the spirit of international tax law to be able to receive government aid packages, and that wealthy individuals and all companies must pay their fair share to contribute to economic recovery.39 This could have been a reason for more news coverage on the subject.

And finally, even though the business community has adopted a more understanding tone overall, individual measures were still criticized for going too far, having too much collateral damage, or being too focused on one particular group of companies.

In short, even though there are indications that the corporate tax avoidance debate is less contested on a more abstract level, political interest remains strong. Until 2016, the politics surrounding corporate tax avoidance were intensively reported. It is unclear why comparable discussions were no longer deemed newsworthy after 2016. Political discourse seems to have had little effect on keeping the subject of corporate tax avoidance in the newspapers on a significantly higher level than the initial rise in reporting that began in 2011.

This raises the question whether these observations influenced public opinion on corporate tax avoidance. If so, an examination of what this means for the dynamic between public opinion, media, and politics in the context of the debate on international tax law is warranted.

IV. Google Trends Data

Evidence suggests that there is a correlation between the number of internet searches on a particular subject and the life span of a news story on that subject. This correlation is specifically found for news stories on politics or social issues.40

Figures 2-5 show the Google Trends data for the examined EU countries, as well as for the United States concerning the search terms “tax avoidance,” “tax havens,” and “BEPS.”41 The Google Trends data reveal that the peaks in interest in the United Kingdom, the United States, and Germany mostly line up with tax scandals involving famous individuals or politicians, instead of the legislative action to curb corporate tax avoidance that the newspapers generally focus on.

Figure 2. Google Trends Data on the United Kingdom
Figure 3. Google Trends Data on the United States
Figure 4. Google Trends Data on Germany
Figure 5. Google Trends Data on the Netherlands

For instance, in the United Kingdom the highest peaks correspond with media reporting on the tax scandal surrounding Jimmy Carr (June 2012), the UK Uncut protests (May 2014), the HSBC scandal (February 2015), the uncovering of David Cameron’s offshore family trust in the Panama Papers (April 2016), and the uncovering of Queen Elizabeth’s offshore assets in the Paradise Papers (November 2017).

In the United States the highest peaks correspond with media reporting on the Walter Anderson tax evasion case (October 2006), the UBS bank scandal (July 2007 and April 2009), the enactment of the Foreign Account Tax Compliance Act (April 2010), Jimmy Carr (June 2012), the HSBC scandal (February 2015), the publication of the OECD’s final reports on BEPS (October 2015), the publication of the Panama Papers (April 2016) and the Paradise Papers (November 2017), tax inversion legislation (October 2016 and April 2018), and former President Trump’s tax affairs (October 2018 and September 2020).

In Germany the highest peaks mostly line up with reporting on tax scandals involving bank secrecy that allowed rich individuals to hide wealth in tax havens and the political battle for the chancellorship between Angela Merkel and Peer Steinbrück. Stories that made news included the Swiss comparing Steinbrück to a Nazi (April 2009),42 Steinbrück’s plans to withdraw banking licenses for German banks43 involved in the publication of the Offshore Leaks (April 2013),44 the publication of the OECD final reports on BEPS (October 2015), and the publication of the Panama Papers (April 2016) and the Paradise Papers (November 2017). Across these countries the general public’s attention appears to be focused primarily on scandals involving wealthy individuals and national political discussions. There is much less concern about tax avoidance by multinationals.

Interestingly though, the Google Trends data for the Netherlands suggests that the peaks in search interest align much more with reporting on legislative action related to corporate tax avoidance.

It is not possible to state definitively why the search behavior in the Netherlands is different from other examined countries. Over the examined period, the Netherlands increasingly struggles with its reputation as a jurisdiction through which large amounts of capital flow. There are also questions concerning the function that letterbox companies domiciled in the Netherlands perform in this practice.

One problem, however, is that Dutch media reporting is often lobbed together: Russian oligarchs hiding their wealth by funnelling it through Dutch letterbox companies to ultimately enjoy Cypriot bank secrecy rules, famous rock bands using conduit companies to engage in treaty shopping to ensure favorable tax treatment of received royalties, U.S. companies using Dutch CV/BV structures in combination with the U.S. check-the-box rules to ensure perpetual tax deferral in the United States, and possible state aid issues with tax rulings. The publicly available data does not specify which of these items triggered the Google search behavior.

Certain elements were shared across all examined jurisdictions. For example, all the examined countries showed a downward trend in terms of search interest over time. This is consistent with the observation herein that tax scandals consistently appear to lose their shock value. In addition, across jurisdictions, a large part of reporting is aimed at big tech companies, with reporting specifically focused on how legislation should put a stop to their tax avoidance practices.

However, the Google Trends data suggest this does not line up with search interest. For instance, the European Commission’s decisions in state aid cases involving Starbucks (as the first) or Apple (as the biggest), and the subsequent overturning of these decisions by the General Court of the European Union, hardly produced any search interest at all when compared to the tax scandals involving famous individuals. In fact, the Google Trends data for each country appears to line up mostly with the dominant national political discussions at the time. Finally, all the countries show a much higher interest in other politically charged, nontax subjects than tax-related matters such as tax avoidance, tax havens, or BEPS. In fact, compared with other political hot topics, tax avoidance does not seem to register as relevant at all.

A. What’s Driving Government Action?

The decreasing number of articles on corporate tax avoidance in the news media could suggest that, although public opinion on corporate tax avoidance is strong, the issue is less contested and therefore less newsworthy. As discussed herein, there are arguments that support this line of reasoning.

The media analysis suggests that sentiment toward corporate tax avoidance has been generally negative and has become increasingly more negative over the examined period. Moreover, the prolonged media attention on tax avoidance behavior by a specific group of multinationals has caused politicians to examine the subject of corporate tax avoidance more closely.

But the Google Trends data seem to tell a different story. The Google Trends data suggest that the general public was not as focused on corporate tax avoidance as the sharp increase in media reporting suggests. In fact, the Google Trends data suggest that the general public has been indifferent to this issue, and that this has been the case throughout the examined period. This may suggest that, in the case of corporate tax avoidance, the collective outrage that has been portrayed in the media as “public opinion” might not be an accurate reflection of the general public’s sentiment.

If the level of outrage that has been presented in the media as public opinion does not correlate with the general public’s actual concerns, then this does not definitively answer the question whether public opinion on corporate tax avoidance was (or was not) the main driving force for political action. But although the public’s generally held opinion could still influence government behavior, there are also alternative, and possibly more plausible causes for government action that align with the research.

B. Public Opinion and Politicians

Some claim that political action is automatically justified if it is either a reflection of or adequately supported in the public opinion.45 However, the research is not clear on whether public opinion might push governments into changing public policy.

It has been suggested that an individual’s opinion on most subjects is determined mostly by their political affiliation.46 On this basis, one cannot conclusively establish that public opinion is swayed through the communication strategies of the media. Yet even if it is, many commentators have noted that voters typically do not hold politicians accountable for their “bad” policy choices.

According to some commentators, because most voters “cannot manage the task of competent retrospection,”47 they mostly vote the same way they did before. In fact, the biggest electoral danger to governments might come from external factors, such as economic downturns.48 On the basis of these findings, there might not be much incentive for politicians to shape their policies to reflect public opinion — especially if it is not already in alignment with their political platform or if the opinion is not one that is generally held by their specific constituency.

V. The Impact of Public Opinion on ATAD

The data suggest that countries that historically have been stronger proponents of tax competition and tax sovereignty, such as the United Kingdom, have been more reluctant to agree to political measures curbing tax avoidance through international policy coordination. For instance, in June 2015 The Guardian wrote that there is “small hope for tax harmonisation across the EU with a UK government so eager to attract multinationals with low rates.” This was based on a statement by David Gauke, the minister responsible for tax policy, who said, “Where it has to choose, Britain prefers tax competition to policy coordination.”49

Regarding the discussion on ATAD, the U.K. chancellor at the time, George Osborne, reiterated this position. During the Economic and Financial Affairs Council meeting of February 2016, he said that the member states should only work on the measures that were agreed on as minimum standards in the 2015 OECD/G-20 BEPS reports, and that the anti-tax-avoidance directive should not include other “non-BEPS” measures.50 Osborne repeated this position in his March 2016 U.K. budget speech,51 just one month before the ICIJ published the Panama Papers.

It is hard to deny that the efforts of the ICIJ place more political focus on corporate tax avoidance. Interestingly though, certain events, particularly the Offshore Leaks and the Panama Papers, and to a lesser extent the Paradise Papers, were not primarily about corporate tax avoidance. Instead, they were mostly about tax evasion by wealthy individuals hiding their wealth through illegal means. One can observe that the political effect of these tax scandals was twofold. On one hand, media reporting, and especially the Panama Papers, sped up European political action regarding matters such as bank secrecy rules and enforcement activity related to individuals hiding assets or income from tax authorities. This political reaction was, by and large, in line with existing policies in most EU countries (including the United Kingdom). A more concerted approach at the EU level in reaction to the Panama Papers might not, therefore, be a surprising policy response.

On the other hand, the ICIJ publication also seemed to clear the political path for more policy coordination on corporate tax avoidance via the anti-tax-avoidance directive. In the ECOFIN meetings in May and June 2016, it became clear that the United Kingdom had given up its earlier, strongly voiced opposition to including non-BEPS measures in ATAD. Without the United Kingdom in its corner anymore, other, small member states quickly followed suit. As a result, the directive was unanimously adopted on June 17, 2016.

This political U-turn by the United Kingdom was quite unexpected — as policy coordination on these points was very much contested between the member states, and particularly for the United Kingdom. This raises the question whether a scandal on tax evasion, like the Panama Papers, would constitute the political tipping point for the United Kingdom to change its mind on such a fundamental issue. One explanation is that the Panama Papers caused public opinion on tax competition and corporate tax avoidance in the United Kingdom to change in favor of EU policy coordination. But this seems to be an unlikely explanation for two reasons.

First, the Brexit referendum was held around that same period. On June 23, 2016, 52 percent of the British people voted to leave the EU — in part, because the EU had too much influence on U.K. public policy and because of the United Kingdom’s unsuccessful efforts to renegotiate the EU treaty.52 It would seem unlikely that the U.K. government would move ahead on policy coordination on corporate income taxation at such a precarious time. Even if the Panama Papers increased public pressure on corporate tax avoidance, there seems to be little reason for the United Kingdom not to wait on the results of the Brexit referendum. This position seems more likely given the United Kingdom’s political position on ATAD only three months before it was adopted.

Second, according to media analysis and Google Trends data combined, publication of the Panama Papers invoked a strong media response. However, the media attention was not aimed at corporate tax avoidance. In fact, a large share of the news media attention, particularly between April 4 and April 7, 2016, was devoted to Blairmore Holdings Inc., an investment fund that managed tens of millions of pounds on behalf of wealthy British families. The fund, which until 2012 was based in the Bahamas, had never paid tax in the United Kingdom.

Until shortly before his death in 2010, former U.K. Prime Minister David Cameron’s father was registered as one of the fund’s five directors.53 On April 7, 2016, Cameron admitted to having benefitted from the investment fund, prompting Labour member of Parliament Richard Burgon to comment that there was “a ‘crisis of morals’ at the heart of the Conservative government.”54

The data provides some indirect evidence that the primary effect of the Panama Papers in the United Kingdom may not have been to influence U.K. public opinion on corporate tax avoidance, but rather to place the U.K. prime minister in a difficult political and public position. Beyond reaffirming the United Kingdom’s position on abolishing bank secrecy, political pressure to act on corporate tax avoidance may have come from U.K. politicians — most of whom likely already did not agree with the Conservatives’ politics. Changes in media coverage may have been prompted by public reaction to news stories involving the prime minister, rather than from a change of the public’s opinion on corporate tax avoidance.

Also, in the Netherlands and Germany, political forces appear to have been important for the adoption of ATAD. For instance, the Netherlands held the EU Council presidency in the first half of 2016, and Jeroen Dijsselbloem, the Dutch minister of finance at the time, was president of the Eurogroup. The Dutch government therefore considered that it should act as an honest broker concerning ATAD and not take any political position on the directive, even though there might have been a national interest to do so.55

Moreover, Germany has never made a secret of its aversion to corporate tax competition with the smaller member states within Europe (for example with regard to patent boxes). Moreover, the country has been pushing for more policy coordination on corporate taxation in the EU since well before the public debate on corporate tax avoidance started up (for instance, in the period leading up to the EU Code of Conduct on Business Taxation,56 or in dealing with the eurozone crisis in 2011).

Germany’s stance on corporate tax avoidance can therefore hardly be said to have been caused by a change in public opinion. The Google Trends data also does not point to such a sudden change in attitude in Germany. But it could be argued that an increasingly negative sentiment on corporate tax avoidance might have created a political opportunity through which it became more likely that Germany could achieve its long-standing agenda. This opportunity was facilitated by the fact that there was no political opposition from the United Kingdom or the Netherlands.

VI. Conclusion

The Google Trends data on internet searches relating to the topic of tax avoidance gives a new and interesting perspective on the assumption that public opinion on corporate tax avoidance has been the main driver for governments to take legislative action. The data indicate that there is a disconnect between the issues on which the media has been reporting and the issues the general public has been searching for on the internet. While media coverage focused to a great extent on legislative action to curb corporate tax avoidance, the general public appeared to be more interested in tax scandals involving famous individuals hiding assets from the tax authorities.

This disconnect seems to be consistent across different countries as well as through the entire examined period. Also, this disconnect does not seem to be affected by economic downturns or upswings. In fact, there is a continued decline in public interest in tax avoidance and tax scandals in general, irrespective of the economic situation. There is a large degree of uncertainty about how media reporting affects public opinion. Accordingly, it is difficult to assess the ultimate effect of public opinion on policy decisions. Academic literature indicates that an analysis of how public opinion affects public policy is not straightforward. According to this literature, other factors are required to assess this connection more adequately.

This view is further supported by the case of the political decision-making processes surrounding the anti-tax-avoidance directive in the EU. It appears that various political forces may have been of more immediate importance for getting the directive adopted than the general public’s opinion on corporate tax avoidance. Of course, this does not mean that public opinion never has been, or never could be, the main reason for government action. Nevertheless, there is good reason to doubt a strong causal connection between public opinion and political action to curb corporate tax avoidance.

FOOTNOTES

1 E.g., Sol Picciotto, “The METR, a Minimum Effective Tax Rate for Multinationals,” Tax Justice Network blog, Apr. 15, 2021; Johannes Becker and Joachim Englisch, “The German Proposal for an Effective Minimum Tax on Multinational’s Profits,” Tax Justice Network blog, Jan. 15, 2019; Pablo A. Hernández González-Barreda, “A Historical Analysis of the BEPS Action Plan: Old Acquaintances, New Friends and the Need for a New Approach,” 46(4) Intertax 278 (2018); Sissie Fung, “The Questionable Legitimacy of the OECD/G20 BEPS Project,” 10(2) Erasmus L. Rev. 78 (2017); Robert M. Dover, Fixing Financial Plumbing: Tax, Leaks and BEPS in Europe 4 (2016).

2 The Guardian, Financial Times, De Telegraaf, de Volkskrant, Financieele Dagblad, and Frankfurter Allgemeine Zeitung.

3 Schema, Google, AXIOS, “The Lifespan of News Stories” (2021).

4 Habermas, “The Public Sphere,” in Contemporary Political Philosophy: An Anthology 143-144 (2019).

5 Noelle-Neumann, The Spiral of Silence: Public Opinion, Our Social Skin 21 (1984).

6 Surowiecki, The Wisdom of Crowds: Why the Many Are Smarter Than the Few and How Collective Wisdom Shapes Business, Economies, Societies, and Nations xiii (2004).

7 Id. at 255.

8 McQuail, McQuail’s Mass Communication Theory 182 (2010).

9 Galtung and Ruge, “The Structure of Foreign News: The Presentation of the Congo, Cuba and Cyprus Crises in Four Norwegian Newspapers,” 2(1) J. Peace Res. 64, 81-84 (1965).

10 Harcup and O’Neill, “What Is News? Galtung and Ruge Revisited,” 2(2) Journalism Stud. 261, 275 (2001).

11 Shoemaker and Cohen, News Around the World: Content, Practitioners, and the Public (2012).

12 Pashler and Heriot, “Perceptions of Newsworthiness Are Contaminated by a Political Usefulness Bias,” San Diego Legal Studies Paper No. 18-355, 2 (2018).

13 Id. at 8.

14 Patricia Moy, David Tewksbury, and Eike Mark Rinke, “Agenda-Setting, Priming, and Framing,” in 1 The International Encyclopedia of Communication Theory and Philosophy 52 (2016).

15 Dietram A. Scheufele and Tewksbury, “Framing, Agenda Setting, and Priming: The Evolution of Three Media Effects Models,” 57(1) J. Comm. 9, at 11 (2007).

16 Id. at 14.

17 Id. at 17.

18 Vincent Price and Tewksbury, “News Values and Public Opinion: A Theoretical Account of Media Priming and Framing,” in 13 Progress in the Communication Sciences 173, 182-183 (1997).

19 Price and Tewksbury point out that the theory does not suggest that the media are actively trying to persuade and influence their audiences. Instead, they argue that events and issues emphasized by the media serve as yardsticks to evaluate political behavior. See id. at 181.

20 The articles on corporate tax avoidance also showed the biggest changes in year-on-year volume over the examined period.

21 E.g., Vanessa Houlder, “Nations Agree to Corporate Tax Avoidance Crackdown,” Financial Times, June 6, 2017.

22 E.g., Marietje Schaake, “There Has Never Been a Better Time to Make Big Tech Pay Its Way,” Financial Times, May 20, 2020.

23 E.g., Rajeev Syal and Patrick Wintour, “MPs Attack Amazon, Google and Starbucks Over Tax Avoidance,” The Guardian, Dec. 3, 2012.

24 See Shannon Chen, Kathleen Schuchard, and Bridget Stomberg, “Media Coverage of Corporate Taxes,” SSRN, at 28 (last updated June 27, 2018).

25 E.g., Houlder, “Tax Officials to Soften Stance on Avoidance,” Financial Times, Aug. 19, 2010.

26 E.g., European Commission, “Commission Work Programme 2015: A New Start,” COM(2014) 910 final, at 8 (Dec. 16, 2014).

27 E.g., Houlder, “‘Google Tax’ Take Swells to £281m as Levy Starts to Bite,” Financial Times, Sept. 13, 2017.

28 E.g., Houlder, “IKEA Avoided €1bn in Tax, Claim MEPs,” Financial Times, Feb. 12, 2016.

29 E.g., Jim Brunsden, “Ceci N’est Pas Une Blacklist,” Financial Times, Sept. 15, 2016.

30 E.g., Martin Hearson and Richard Brooks, “Calling Time: Why SABMiller Should Stop Dodging Taxes in Africa,” Action Aid UK (Jan. 2010).

31 E.g., Ian Griffiths, “Amazon: £7bn in Sales, No UK Corporation Tax,” The Guardian, Apr. 4, 2012.

32 See, e.g., Houlder, “Voters in Marginals Seek Clampdown on Corporate Tax Avoidance,” Financial Times, Apr. 29, 2015 (stating that a survey commissioned by Christian Aid and Equality Trust found that 58 percent of respondents want more action on corporate tax avoidance); Nick Shaxson, “New Christian Aid Poll: 70 Percent Believe ‘Legal’ Tax Avoidance Is Wrong,” Tax Justice, Sept. 18, 2015; David Pegg, “Tax Avoidance by Big Firms Is Morally Wrong, Say Nine Out of 10 in UK,” The Guardian, Nov. 27, 2017.

33 E.g., Houlder, “CBI Urges Restraint in Crackdown on Tax Dodging by Multinationals,” Financial Times, Sept. 24, 2015.

34 E.g., Andrew Hill, “Chiefs Seek to Rebuild Public Trust After Trump and Brexit Votes,” Financial Times, Jan. 17, 2017.

35 E.g., Marla Dukharan, “EU Is Weaponising Money Laundering and Tax Rules,” Financial Times, Aug. 26, 2020.

36 E.g., Julia Kollewe, “‘Political Crap’: Tim Cook Condemns Apple Tax Ruling,” The Guardian, Sept. 1, 2016.

37 ICIJ, “Pandora Papers” (Oct. 2021).

38 Koos Boer, “Pandora Papers: kwaad van mythische proporties of de tijdgeest ontsnapt uit de doos?” Snelrecht, Oct. 26, 2021 (in Dutch).

39 E.g., Ben Hall, “Taxing Times for Europe as Pandemic Cripples Government Revenue,” Financial Times, July 15, 2020.

40 See supra note 3.

41 The search terms are reflected in each country’s native language. Also, several variations on these search terms have been compared (in both English and the native language) to ensure that the outcome is representative. For instance, it was found that the term “tax havens” gave a more accurate result than “tax haven.”

42 R. Kleine and P. Ronzheimer, “Schweizer vergeleichen Steinbrück mit Nazis!” Bild Zeitung, Mar. 19, 2009 (in German).

43 In 2012 Steinbrück was elected by the SPD to challenge Merkel for the German chancellorship. The main basis of his election platform in 2012 was to come down hard on banks — and specifically Deutsche Bank — with financial regulation including separating banks’ retail and investment operations. See, e.g., Stephen Brown and Erik Kirschbaum, “Steinbrueck to Challenge Merkel in 2013,” Reuters, Sept. 28, 2012.

45 Gordon Graham, “Public Opinion and the Public Sphere,” in Beyond Habermas: Democracy, Knowledge, and the Public Sphere 33 (2013).

46 John Zaller, “What Nature and Origin Leaves Out,” 24(4) Critical Rev. 569, 626-627 (Dec. 2012).

47 Christopher Achen and Larry M. Bartels, Musical Chairs: Pocketbook Voting and the Limits of Democratic Accountability (2004).

48 Zaller, supra note 46, at 627.

49 “Tax Laws for Big Business Are Broken. Britain Wants Them to Stay That Way,” The Guardian, June 21, 2015.

50 European Council, Economic and Financial Affairs Council meeting (Feb. 12, 2016).

51 HM Treasury, “Budget 2016: George Osborne’s Speech” (Mar. 16, 2016).

52 See also David Cameron’s speech announcing the referendum (Jan. 23, 2013).

53 See, e.g., Juliette Garside, “Fund Run by David Cameron’s Father Avoided Tax in Britain,” The Guardian, Apr. 4, 2016.

54 Robert Booth, Holly Watt, and David Pegg, “David Cameron Admits He Profited From Father’s Panama Offshore Trust,” The Guardian, Apr. 7, 2016.

55 Tweede Kamer, Kamerstukken II (explanatory memorandum), 22112, nr. 2071 (2015/2016) (in Dutch).

56 Martijn Nouwen, “Inside the EU Code of Conduct Group: 20 Years of Tackling Harmful Taxation,” IBFD Doctoral Series 59, at 29 (May 2021).

END FOOTNOTES

Copy RID