The UK government has moved closer to requiring country-by-country tax reports by multinational companies with the inclusion of a new clause in the finance bill currently making its way through Parliament.
It emerged yesterday that ministers had accepted an amendment to the bill from Labour MP Caroline Flint, which would permit the government to introduce country-by-country reporting (CBCR).
However, the amendment appears to only give government permission to introduce CBCR at some stage rather than impose it on UK companies immediately when the bill is passed.
The relevant clause in the bill says: “The Treasury may by regulations require the group tax strategy to include a country-by-country report.”
Speaking during a finance bill debate in the House of Commons, Rebecca Long-Bailey, another Labour MP, said: “The amendment stated that the government ‘may’ exercise their powers in this regard. However, I hope that the government ‘will’ exercise their powers in that regard…”
Tory MP Jane Ellison said: “It is worth noting a couple of breakthroughs for which the bill will be long remembered.
“The first is the amendment that was moved last night by the right honourable member for Don Valley (Caroline Flint) on public country-by-country reporting, which the government supported.
“The welcome degree of cross-party consensus cemented the UK’s position of international leadership on this issue.”
The EU Accounting and Transparency Directives already require country-by-country reporting of payments made to governments by extractive industry companies. The EU also requires banks and financial institutions to publish corporate income tax data under the Capital Requirement Directive.
Meanwhile, the OECD has proposed that groups with turnovers of more than €750m should report their corporate taxes by country on a confidential basis to tax authorities.
Tom Dane of PwC recently wrote for Board Agenda: “Large businesses now operate on a global basis, yet they are taxed by countries whose boundaries have largely been determined by various accidents of politics, history and geography.
“How to reconcile the global footprint of a modern business with the fiscal rights and obligations of separate tax jurisdictions is at the heart of country-by-country reporting.”
The finance bill now goes to its second reading in the House of Lords on 13 September.