Vince Cable has told the Sunday Telegraph that he is ‘very sympathetic’ to the idea of country-by-country reporting of multinationals’ taxes and profits. The paper reported yesterday that HM Treasury was also ‘believed to be supportive of moves to increase what was described as a “transparency push” by one official’.
Cable suggested that greater transparency would ‘stop companies being “tarnished” by tax rows where the detailed facts were not available’.
‘Companies like Starbucks, he argued, had a “good story” to tell on their UK operations despite some criticising them for the low levels of corporation tax they pay,’ the paper added. But Cable said any proposals should come under the control of the G8 group of industrialised nations and ‘should not be a matter for Europe alone’.
Last week the Mail on Sunday reported that Britain ‘is to drop its opposition’ to plans to ‘force all European companies to say what tax they pay’ in every country in which they operate: ‘After agreement in Brussels last week that Europe’s banks must reveal the taxes paid in each country, the Treasury is understood to be backing proposals to widen this to all firms.’
The paper quoted Liberal Democrat MEP Sharon Bowles as saying: ‘It’s something the UK has traditionally not been behind. It has not been a strong opponent, but the accountancy firms that oppose it tend to be quite persuasive. The UK is now supportive.’
EU finance ministers meeting in Brussels on 5 March ‘broadly endorsed’ a package to amend EU rules on capital requirements and transparency. A ‘final deal’ may be reached by the end of March, according to reports. Banks will be required to report taxes and profits on a country-by-country basis from 2015, unless the European Commission delays or amends the provisions in the light of an impact assessment to be conducted in 2014.
The OECD’s recent report announcing a review of the international tax system recognised a need for ‘greater transparency on effective tax rates’ of multinationals. But it did not discuss country-by-country reporting, and some tax professionals as well as multinationals have opposed such a move on the grounds of compliance cost and the risk that the additional information might be misinterpreted.
Tax campaigner Richard Murphy said in his book Over here and under-taxed, published last month, that tax haven secrecy was compounded by the consolidated accounts that multinationals produce. ‘They only show the transactions between the group as a whole and third parties … Every dollar of intra-group trading within multinational corporations is hidden from view, which means … that 60% of world trade remains invisible,’ he wrote.
But Dave Hartnett, former permanent secretary for tax at HMRC, has warned that country-by-country reporting could result in ‘crude comparison’ of a multinational’s tax bills in different countries.
In an interview with Tax Journal, published last week, Hartnett said: ‘There is a strong case for more transparency in relation to the tax paid by companies and at a time of financial austerity, citizens want to be able to see for themselves what tax corporations are paying and judge whether it is fair.
‘But I have misgivings about country by country reporting if the aim of those seeking it is to compare tax paid in one country by a multi-national with what it pays in another. Such crude comparison is of very little value unless the reader has a good understanding of the different tax incentives available in each country and other features of each tax system.’
Vince Cable has told the Sunday Telegraph that he is ‘very sympathetic’ to the idea of country-by-country reporting of multinationals’ taxes and profits. The paper reported yesterday that HM Treasury was also ‘believed to be supportive of moves to increase what was described as a “transparency push” by one official’.
Cable suggested that greater transparency would ‘stop companies being “tarnished” by tax rows where the detailed facts were not available’.
‘Companies like Starbucks, he argued, had a “good story” to tell on their UK operations despite some criticising them for the low levels of corporation tax they pay,’ the paper added. But Cable said any proposals should come under the control of the G8 group of industrialised nations and ‘should not be a matter for Europe alone’.
Last week the Mail on Sunday reported that Britain ‘is to drop its opposition’ to plans to ‘force all European companies to say what tax they pay’ in every country in which they operate: ‘After agreement in Brussels last week that Europe’s banks must reveal the taxes paid in each country, the Treasury is understood to be backing proposals to widen this to all firms.’
The paper quoted Liberal Democrat MEP Sharon Bowles as saying: ‘It’s something the UK has traditionally not been behind. It has not been a strong opponent, but the accountancy firms that oppose it tend to be quite persuasive. The UK is now supportive.’
EU finance ministers meeting in Brussels on 5 March ‘broadly endorsed’ a package to amend EU rules on capital requirements and transparency. A ‘final deal’ may be reached by the end of March, according to reports. Banks will be required to report taxes and profits on a country-by-country basis from 2015, unless the European Commission delays or amends the provisions in the light of an impact assessment to be conducted in 2014.
The OECD’s recent report announcing a review of the international tax system recognised a need for ‘greater transparency on effective tax rates’ of multinationals. But it did not discuss country-by-country reporting, and some tax professionals as well as multinationals have opposed such a move on the grounds of compliance cost and the risk that the additional information might be misinterpreted.
Tax campaigner Richard Murphy said in his book Over here and under-taxed, published last month, that tax haven secrecy was compounded by the consolidated accounts that multinationals produce. ‘They only show the transactions between the group as a whole and third parties … Every dollar of intra-group trading within multinational corporations is hidden from view, which means … that 60% of world trade remains invisible,’ he wrote.
But Dave Hartnett, former permanent secretary for tax at HMRC, has warned that country-by-country reporting could result in ‘crude comparison’ of a multinational’s tax bills in different countries.
In an interview with Tax Journal, published last week, Hartnett said: ‘There is a strong case for more transparency in relation to the tax paid by companies and at a time of financial austerity, citizens want to be able to see for themselves what tax corporations are paying and judge whether it is fair.
‘But I have misgivings about country by country reporting if the aim of those seeking it is to compare tax paid in one country by a multi-national with what it pays in another. Such crude comparison is of very little value unless the reader has a good understanding of the different tax incentives available in each country and other features of each tax system.’
