Tax Transparency Advocates Clash on Corporate Disclosure Debate

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By Ben Stupples

Tax transparency advocates are split on whether large businesses should have to disclose their tax returns on a public basis, in the latest debate on corporate disclosure.

At a July 6 panel discussion to close the Tax Justice Network’s annual conference in London, those pushing for reforms failed to reach a consensus on whether big companies should publicly disclose information including tax allowances and tax relief.

“We want to strengthen public accountability, attacking secrecy and opacity,” Prem Sikka, a University of Essex professor emeritus of accounting, said as he called for the public disclosure of large companies’ tax returns. Doing so will provide an insight into how businesses use tax breaks to lower taxable profits, he added.

Yet public returns from big corporations will provide too much information and hamper efforts to find abusive tax planning, according to Richard Murphy, City University of London’s professor of practice in international political economy.

“If we get so much information it takes a researcher around two years to find anything out, they have overloaded us with data and we have failed,” he said.

Public Global Tax Reports

Held at City University of London, the latest debate on corporate transparency comes in the same week as the European Parliament’s plans to introduce public global tax reporting for multinationals companies active in the European Union.

EU lawmakers voted July 4 to make companies publicly reveal data that includes:

  •  profit or losses before income tax;
  •  number of full-time employees;
  •  net turnover and incomes; and
  •  tax paid in each jurisdiction.

Known as public country-by-country reporting, the tax measure originates with Murphy, a Tax Justice Network co-founder who wrote a first draft of it in 2003. In 2015, the OECD incorporated private country-by-country reports as a key part of its rewrite of global tax policy to combat tax avoidance from multinationals.

Public country-by-country reports will give the specific data needed to identify whether multinationals are engaging in abusive tax planning, Murphy said July 6. But publicly disclosing tax returns would risk companies revealing superfluous and commercially sensitive data that is irrelevant to their tax planning, he added.

750 Million Euro Threshold

In the debate, large companies were defined as businesses with annual revenue of more than 36 million pounds ($46.7 million), based on the U.K.’s Companies Act 2006. Country-by-country reporting only applies to those with annual turnover of more than 750 million euros ($856.6 million).

Krishen Mehta, a tax justice campaigner and a former PricewaterhouseCooopers partner, countered Murphy in the debate by arguing that improved use of data analytics will provide a means of identifying abusive tax planning in public tax returns.

Meanwhile, Hera Hussein, community manager at database OpenCorporates, argued that citizens outside the tax industry could benefit from the data.

Murphy insisted that public country-by-country reports are the threshold for the amount of data that large corporations should have to reveal.

“Why are we doing this? We want companies to pay the right amount of tax in the right place,” he said. “We don’t change anything” with public tax returns.

Following the July 4 vote in the European Parliament, EU member nations will decide on whether to introduce public country-by-country reporting in the trading bloc.

To contact the reporter on this story: Benjamin Stupples in London at bstupples@bna.com

To contact the editor responsible for this story: Penny Sukhraj at psukhraj@bna.com

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