If tax transparency is justified, it should apply to all multinationals, says FT editorial
More than 181,000 people have signed an online petition calling on EU finance ministers engaged in talks on banks’ capital standards to require banks to disclose their profits and taxes on a country-by-country basis.
‘You have already signalled that cracking down on tax avoidance is a priority – this is a crucial reform to ensure that everyone pays their fair share,’ says the petition posted by Avaaz, the internet campaign organisation which claims to have more than 19m members worldwide.
Basel III
The European parliament is ‘poised’ to secure a rule to have banks publish, country by country, their profit and tax paid’, a Financial Times editorial noted on 20 February. The paper reported that in a twist to EU negotiations over rules to make banks safer, European banks are ‘facing the threat of having to reveal their taxes and profits on a country-by-country basis’.
The parliament is pressing for a tougher disclosure regime as part of the law implementing the Basel III international accord. ‘Barclays, for instance, would be required to publish its profits and taxes in every national jurisdiction – from the UK to Zimbabwe,’ the paper added.
Lawmakers and EU negotiators were set to meet today, Bloomberg reported, to ‘break logjams over banker bonuses, financial reporting requirements and the amount of power retained by national regulators’.
Banks are worried, the FT report said, that the tax reporting requirement would leave them ‘vulnerable to public pressure’ over taxes.
‘Let the sun shine’
The FT editorial suggested, however, that measures to ‘let the sun shine’ on tax planning activities would ‘clarify’ whether the public interest requires a change in the rules.
‘Like all multinational companies, banks live in an environment in which dexterous tax planning can legally lower the tax due by taking advantage of loopholes and differences between national rules … In any specific case there may be nothing questionable about such tax planning. But if so, publication of how profits and corporate tax are allocated across countries is not something to fear provided the rule requires banks to simply publish numbers they prepare in any case. No additional administrative burden need be imposed,’ it said.
The editorial added: ‘A valid objection is that this is a piecemeal way of going about it. Why only banks? If tax transparency is justified, it should apply to all multinationals (extractive companies face a sectoral transparency rule of their own).’
'Data, not information'
MPs on the Commons public accounts committee asked heads of tax at the big four accountancy firms last month whether they would support companies being required to report their turnover, profits and tax in every country in which they operate.
Bill Dodwell, head of tax policy at Deloitte, said he did not support such a requirement. He noted that some of the FTSE 100 companies bosses who had replied to Conservative MP Stephen McPartland’s invitation to back greater transparency had pointed out ‘the huge cost of it, the complexity and, in some cases, the commercial confidentiality’. But Dodwell said he thought it was possible to ‘reach a better system’.
Jane McCormick, head of tax at KPMG, told the committee: ‘Gathering the data, particularly if you are relating them to cash tax, takes some time. The point there is that the problem with that proposal is that it is data, not information. Actually, even as a trained tax professional, looking at the raw numbers coming out of that would not necessarily give you a real picture of what is going on. For example, in a country where a lot of investment is going in, you may not be paying any tax because of the investment reliefs. I think there must be a better way of coming up with an explanation of what is going on.’
If tax transparency is justified, it should apply to all multinationals, says FT editorial
More than 181,000 people have signed an online petition calling on EU finance ministers engaged in talks on banks’ capital standards to require banks to disclose their profits and taxes on a country-by-country basis.
‘You have already signalled that cracking down on tax avoidance is a priority – this is a crucial reform to ensure that everyone pays their fair share,’ says the petition posted by Avaaz, the internet campaign organisation which claims to have more than 19m members worldwide.
Basel III
The European parliament is ‘poised’ to secure a rule to have banks publish, country by country, their profit and tax paid’, a Financial Times editorial noted on 20 February. The paper reported that in a twist to EU negotiations over rules to make banks safer, European banks are ‘facing the threat of having to reveal their taxes and profits on a country-by-country basis’.
The parliament is pressing for a tougher disclosure regime as part of the law implementing the Basel III international accord. ‘Barclays, for instance, would be required to publish its profits and taxes in every national jurisdiction – from the UK to Zimbabwe,’ the paper added.
Lawmakers and EU negotiators were set to meet today, Bloomberg reported, to ‘break logjams over banker bonuses, financial reporting requirements and the amount of power retained by national regulators’.
Banks are worried, the FT report said, that the tax reporting requirement would leave them ‘vulnerable to public pressure’ over taxes.
‘Let the sun shine’
The FT editorial suggested, however, that measures to ‘let the sun shine’ on tax planning activities would ‘clarify’ whether the public interest requires a change in the rules.
‘Like all multinational companies, banks live in an environment in which dexterous tax planning can legally lower the tax due by taking advantage of loopholes and differences between national rules … In any specific case there may be nothing questionable about such tax planning. But if so, publication of how profits and corporate tax are allocated across countries is not something to fear provided the rule requires banks to simply publish numbers they prepare in any case. No additional administrative burden need be imposed,’ it said.
The editorial added: ‘A valid objection is that this is a piecemeal way of going about it. Why only banks? If tax transparency is justified, it should apply to all multinationals (extractive companies face a sectoral transparency rule of their own).’
'Data, not information'
MPs on the Commons public accounts committee asked heads of tax at the big four accountancy firms last month whether they would support companies being required to report their turnover, profits and tax in every country in which they operate.
Bill Dodwell, head of tax policy at Deloitte, said he did not support such a requirement. He noted that some of the FTSE 100 companies bosses who had replied to Conservative MP Stephen McPartland’s invitation to back greater transparency had pointed out ‘the huge cost of it, the complexity and, in some cases, the commercial confidentiality’. But Dodwell said he thought it was possible to ‘reach a better system’.
Jane McCormick, head of tax at KPMG, told the committee: ‘Gathering the data, particularly if you are relating them to cash tax, takes some time. The point there is that the problem with that proposal is that it is data, not information. Actually, even as a trained tax professional, looking at the raw numbers coming out of that would not necessarily give you a real picture of what is going on. For example, in a country where a lot of investment is going in, you may not be paying any tax because of the investment reliefs. I think there must be a better way of coming up with an explanation of what is going on.’
