We reported last week on a meeting of the UK All-Party Parliamentary Group on Responsible Taxation, convened to hear evidence on the application of the OECD’s BEPS initiative.
The chair and vice-chair of the meeting challenged calls to maintain company confidentiality on the basis that the rights attaching to the limited liability status of a company are matched by responsibilities to disclose financial and other information on the public record. Companies were warned that they could not assume that commercial confidentiality would be accepted indefinitely. It was beginning to look as though an easy win for those concerned to restore the credentials of tax systems worldwide might be to make public the country-by-country reporting of multi-national groups. Three specific developments reinforce this view.
First, the EU proposal for public disclosure of certain information on a CbC basis for multinational groups is expected to be published by the European Commission in April 2016. This has alarmed MNCs more than BEPS CbC, especially consumer-facing businesses that are worried about journalists with an eye for a headline armed with a basic level of information and little interest in seeking clarification for the reasons behind it. This reputational risk is removing the issue of disclosure from the tax department and placing it firmly in the boardroom.
Second, the UK’s position. Page 23 of the Business Tax Roadmap published by HMRC on Budget Day sets out the intentions of the UK government in no uncertain terms: ‘The government believes there is an opportunity to go beyond the outcomes of the BEPS project and enhance transparency over multinationals’ tax affairs by requiring them to make the details of tax paid publicly available on a country-by-country basis. The UK will therefore press the case for public country-by-country reporting on a multilateral basis.’
Finally, as if to echo this, on 24th March the Australian Tax Office published the tax information of 321 Australian-owned resident private companies, under the corporate transparency legislation introduced in late 2015. The legislation enabling this publication has been briefly repealed following representations from investors that the disclosure endangered their security and privacy. The reintroduction of the legislation and the publication of the data followed the Australian Senate’s conclusion that the risks of disclosures to private investors were exaggerated.
All the signs are that CbC reporting will be made on the public record sooner rather than later.
If you would like any more information on this issue please contact George Bull.