Citing the work of David Burton and Richard Rahn, I warned last July about the dangerous consequences of allowing governments to create a global tax cartel based on the collection and sharing of sensitive personal financial information.
I was focused on the danger to individuals, but it’s also risky to let governments obtain more data from businesses.
Remarkably, even the World Bank acknowledges the downside of giving more information to governments.
Here are some blurbs from the abstract of a new study looking at what happens when companies divulge more data.
Relying on a data set of more than 70,000 firms in 121 countries, the analysis finds that disclosure can be a double-edged sword. …The findings reveal the dark side of voluntary information disclosure: exposing firms to government expropriation.
And here are some additional details from the full report.
…disclosure has important costs in allowing exposure to government expropriation… We show that accounting information disclosure can be detrimental to firm development… Such disclosure allows corrupt bureaucrats to gain access to firm-level information and use it for endogenous harassment. …once firm information is disclosed, the threat of government expropriation is widespread. Information disclosure thus allows rent-seeking bureaucrats to gain access to the disclosed information and use it to extract bribes. …Our paper offers a vivid illustration that an important hindrance to institutional development—here in the form of adopting information disclosure—is government expropriation. …The results are thus supportive of Acemoglu and Johnson (2005) on the overwhelming importance of constraining government expropriation in facilitating economic development.
Yet this doesn’t seem to bother advocates of bigger government.