UK MPs back power to make multinationals' country-by-country tax reporting public

Out-Law News | 07 Sep 2016 | 5:06 pm | 2 min. read

Multinationals subject to future country-by-country tax payment reporting requirements in the UK could be forced to make those reports public in future, following a vote by MPs in the House of Commons.

An amendment to the 2016 Finance Bill, proposed by the Labour MP Caroline Flint, would give the government the power to make regulations requiring corporate country-by-country reports to be made publicly available.

Speaking in the House of Commons Jane Ellison, the financial secretary to the Treasury, stressed that any public reporting of country-by-country reporting should be "agreed on a multilateral basis". The amendment would give the government the power to implement public reporting "when appropriate", but its introduction should not put UK-headquartered corporate groups "at a competitive disadvantage", she said.

For this reason, tax expert Andrew Scott of Pinsent Masons, the law firm behind Out-Law.com, said that it was not clear whether public country-by-country reporting would ever actually happen.

"It will be interesting to see whether the passing of this amendment is a significant step in making public country-by-country reports a reality," he said.

"The minister was at pains to emphasise that the government was seeking a multilateral solution, and that the government would not do anything to put UK-headquartered groups at a competitive disadvantage. Consequently, it is not obvious that public reporting will come any time soon. Much depends on whether other countries respond to the UK's attempts to lead the international agenda," he said.

Ellison said that the UK government would "continue to take every opportunity to champion" public reporting as part of its international negotiations.

Flint's amendment had the support of an all-party parliamentary group (APPG) of MPs, which last month said that country-by-country reporting without a publication requirement would not "deliver the level of transparency needed to restore public confidence in the fairness and integrity of our tax system". The Organisation for Economic Cooperation and Development (OECD) has proposed the introduction of country-by-country reporting as part of a package of recommendations to address tax avoidance by multinationals.

The OECD's proposals will require the tax administration in the country where a multinational group is resident to collect information about its activities, and its global income and taxes paid. It will then automatically exchange that information annually with the tax authorities in all countries in which that multinational operates, with the first exchanges expected to start in 2017/18.

The European Commission has proposed that large multinational groups operating in the EU should have to publicly disclose certain information on where they make their profits and where they pay their tax on an EU country-by-country basis. However, these proposals are at a very early stage.

Once in force, the 2016 Finance Bill will introduce a new requirement for the UK's largest businesses to publish their tax strategy, as it relates to their UK activities, online. This must include the UK group's approach to UK tax risk management and governance; the attitude of the corporate group as a whole to tax planning as affecting UK taxation; the level of risk in relation to UK taxation that the corporate group is prepared to accept; and the group's approach towards its dealings with HM Revenue and Customs.