U.K. Politicians Resurrect Making Global Tax Reports Public

The Tax Management Transfer Pricing Report ™ provides news and analysis on U.S. and international governments’ tax policies regarding intercompany transfer pricing. 

By Penny Sukhraj

Sept. 5—A cross-party group of U.K. politicians is trying to put public country-by-country reporting back on the agenda.

This time, their effort comes in the form of a proposed amendment—set for debate and vote before the House of Commons Sept. 5—that would entrench the principle of public reporting of tax strategy and data in law but give the U.K. Treasury the power to “switch on” the public reporting requirement at a time that suits the government.

In June the same group of politicians, led by opposition Labour MP Caroline Flint, sought to force public reporting of tax affairs by multinationals, but this was defeated by 22 votes, with the government citing business uncertainty following the U.K.’s vote to exit the European Union (25 Transfer Pricing Report 324, 7/14/16).

Fear of Breaking Ranks

Little has changed since then by way of sentiment from business, still concerned that the U.K. formally committing to “public” reporting requirements for global companies would see them breaking ranks and going further than the OECD's requirement for tax information to be shared only among tax authorities.

Glyn Fullelove, group tax director of Informa Plc and chairman of the technical committee of the Chartered Institute of Taxation, said it's “very important” that country-by-country reports are available to tax authorities.

“However, some countries have made it clear that if country-by-country reports—made by U.S. multinationals and which are available to tax authorities—are likely to be made public, then they are not going to be keen to share the reports with other tax authorities. It undermines the ability of all tax authorities to see all reports,” Fullelove warned.

He said there is “no sense in one country going it alone” though it is clear that politicians want to keep the topic in the public eye.

Allaying Business Fears

Flint and her fellow members of parliament are now seeking to allay concerns about the timing for public reporting requirements, suggesting that the important goal this time is to get public country-by-country reporting into the statute books, giving the Treasury power to require the public element of the reporting, at a time that it considers suitable, in the future.

“Government has supported the idea of public country-by -country reporting,” Flint said in a statement. “Now they can enshrine that principle in law and give themselves an enabling power to act.”

Risk of Derailing Global Reporting

Rebecca Reading, an international tax partner at RSM UK, said that the move risks derailing U.S. adoption of the OECD's anti-tax base erosion and profit shifting actions, especially if country-by-country reporting—the first measure to gain wide traction across the globe—were to be compromised because the U.K. pushed on ahead of other nations and required multinationals to make their reports public.

“The U.S. has said, ‘You can't have public country-by-country reporting,’ and that it will not ‘play’ on BEPS implementation if that is the case.

“That would be the first BEPS measure, with serious traction in terms of implementation, that could immediately fail because of a difference in philosophy, with the U.S. and OECD on one side and the U.K. and EU on the other,” Reading said.

Apple Affair

The latest move follows the European Commission's order Aug. 30 for the Irish government to recoup 13 billion euros ($14.5 billion) in back taxes from Apple Inc. in a ruling in which it said that Ireland had granted “undue tax benefits” to the tech giant, in an arrangement it considered illegal under EU state aid rules (see related story).

Danish politician Margrethe Vestager—the Competition Commissioner at the heart of the investigation into Apple's tax affairs—said Sept. 1 that public country-by-country reporting would have flagged Apple's tax case (see related story).

To contact the reporter on this story: Penny Sukhraj in London at psukhraj@bna.com

To contact the editor responsible for this story: Rita McWilliams at rmcwilliams@bna.com

For More Information

The proposed amendment is at http://src.bna.com/iie.

Copyright © 2016 Tax Management Inc. All Rights Reserved.