The chairman of the EU parliamentary committee on taxation is calling for a central asset register – an archive for all forms of assets of EU citizens (or at least the wealthy ones) as well as of companies, partnerships and other economic entities.

The proposal has sparked much controversy, and for good reason. The purpose of this digital monstrosity is supposedly to track terrorists, money launderers and tax evaders. But why would terrorists or money launderers report their assets to the registry in the first place? Honest citizens, meanwhile, would be burdened with detailed reporting requirements that resemble, if not worse, a second annual tax return.

Supposedly, only “authorities of record” could access the registry. But that term covers thousands of government employees. We know from experience with the IRS that sensitive data can be leaked to the media.

If the register’s data were to leak, it would be a veritable goldmine for lawsuits from disgruntled spouses and other litigants. Once honest citizens have declared their assets to the register, they could fall victim to a multitude of fraudsters if the data falls into the wrong hands.

The chairman of the Subcommittee on Taxation, Pasquale Tridico, a member of the Left Group in the European Parliament, seems to be motivated above all by his desire to tax multinationals. In particular, he wants to push through the second pillar of the OECD, which provides for a minimum tax of 15% on the profits of multinationals, wherever they are generated.

His argument seems to be that the centralized wealth registry would allow European tax authorities to uncover hidden assets and income in far-flung corners of the world. This is a stretch. Instead of creating a new mountain of data, tax authorities should expand their audit teams.

The second pillar of the Organisation for Economic Co-operation and Development (OECD) is one of the most bizarre phenomena in today’s tax policy. So far, more than 140 countries have signed up to the proposal, but only 45 have introduced or adopted corresponding implementing laws.

Most of them are in Europe. At the same time as they are calling on countries to join the second pillar, the major players in the global economy – the US, the EU and China – are showering selected multinationals with generous subsidies. This combination amounts to governments picking winners and losers on a large scale – not just in sectors but also in countries.

The Biden administration passed 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, which extends subsidies to semiconductor companies. The EU started with subsidies for Airbus and is now turning its sights to semiconductors and electric vehicles. China has a long history of subsidizing steel production and is now channeling public money into solar, wind, semiconductors, batteries and electric vehicles.

Smaller countries have little to no chance of using subsidies to attract parts of the semiconductor, electric vehicle, solar, wind or nuclear industries, for the simple reason that they lack the necessary market size or the skills of the workforce. But they can attract parts of the mid-tech industry, such as the household goods or legal services industries, through low and simple corporate tax systems. They can also serve as intellectual property registers for patents, copyrights and trademarks.

European supporters of the second pillar seem to want to put an end to this kind of tax competition between smaller countries. Good luck – the OECD’s 69-page document on the second pillar is a gift of new business for the big accounting firms, who have rushed to offer explanations and advisory services to multinationals and affected countries.

These 69 pages contain 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+ countries (which seems unlikely), will change the shape of tax competition from simple and efficient low tax rates to more complex and less efficient subsidies.

In the meantime, the proposal for a centralised tax register will hopefully collapse under its own weight. Applied to citizens, it is a massive invasion of privacy. Applied to businesses, it will generate a huge amount of data but do little to help with tax enforcement.

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

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

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