Tax transparency – what’s it worth?

09 February 2016

George Bull

Here’s a conversation which must have taken place millions of times over the years:

‘How much for a unit trust/second hand car/whatever?’

‘Are you buying or are you selling?’

Price is in the eye of the beholder.

So too is tax transparency. To some people, tax transparency looks like, well, transparency. To others it requires disclosure. Others still may see secrecy. And then there is the whole question of privilege which may override all of this.

Four recent developments help put this in context.

First, OECD plans for country-by-country tax reporting. As we have previously reported in weekly tax brief, the OECD and other supra-national bodies, along with many campaign groups, had been pushing for country-by-country reporting of the profits earned and taxes paid by multinational corporations. As OECD plans took shape, it became clear that the information disclosed by affected companies would be made available only to the tax authorities of sovereign states. Many tax campaigners were bitterly disappointed.

Next, the EU’s intervention. In a new development, the EU is now proposing that disclosures by multi-national corporations doing business in Europe will, in some form or the other, be made available publicly. Quite how this will work in practice, and whether it will extend to non-European branches of companies active in Europe, remains to be seen. Within Europe at least, tax campaigners may yet see a happier outcome.

Third, within the UK. Here, MPs have used parliamentary privilege to name, criticise and in some cases shame those whom they regard as guilty of unacceptable tax avoidance, even if neither HMRC nor the courts has had the opportunity to opine on the particular tax situations in question. Both businesses and individuals may find their names in Hansard.

Among the individuals named in parliament, Gary Barlow was accused of unacceptable tax avoidance with Labour calling for the pop star to hand back his OBE. The Prime Minister did not support that call.

Although some businesses, accused of tax avoidance, have been given a tough time by the Public Accounts Committee and by the Treasury Select Committee, fewer have been named and shamed by MPs claiming parliamentary privilege. Last month, Christopher Heaton-Harris MP named a number of eBay sellers whom he believed weren’t paying VAT.

Fourth, we come to alleged misdemeanours committed by MPs themselves. Earlier this week, the Independent Parliamentary Standards Authority found itself in hot water over accusations that it had secretly referred five MPs to the police for investigation. The issue here was that the MPs in question had not been named. There is an argument that anonymity is appropriate until charges are pressed. After all, any member of the public should benefit from that. But it now seems that, subject to a possible vote by the House of Commons this week, the anonymity of MPs might be foregone if there is an issue of parliamentary privilege or constitutional significance. For now, it’s interesting to see MPs claiming secrecy in much the way that many companies would if they could.

Talking of companies, the next major round in this debate about tax transparency comes on Thursday when the Public Accounts Committee will hear representations both from HMRC and from Google in connection with Google’s high-profile tax settlement. HMRC has this afternoon published a document setting out its side of the story.

Ringside seats anyone?

For further information please contact George Bull or your usual RSM contact.