UK should up its public Country-by-Country Reporting amid global developments
There is a lot happening in the world right now when it comes to public Country-by-Country Reporting (pCbCR). And the UK is well placed to be the next major economy to enact a pCbCR law and continue the push for worldwide corporate tax transparency.
Businesses that report on a country-by-country basis disclose details about revenue, profit and taxes for each jurisdiction in which they operate.
Increasingly, legislative progress is being made to mandate public versions of this kind of reporting across the EU’s 27 member states; in Australia with its newly passed law; and in EEA countries such as Norway and Liechtenstein, where rules are in development. We shed light on these key changes and provide a clear picture of the current landscape in the latest update to our paper, Public Country-by-Country Reporting: Why and how multinationals should lift the lid on their taxes. This also now includes a handy crib sheet laying out exactly which policymakers are requiring what and where.
Why the UK should forge ahead on pCbCR
These developments mark great progress for tax transparency and responsible tax behaviour at businesses. Mandatory pCbCR has been shown to reduce the use of tax havens and profit shifting, and increase effective tax rates and domestic tax revenue mobilisation. In short, enhanced transparency can deter tax avoidance and boost corporate income tax revenue collected by governments.
Mandatory pCbCR would also enable low and lower middle-income countries, including the majority of African nations, to have access to large multinationals’ CbCR data for the first time – given the majority of these countries are currently locked out of global confidential information sharing systems.
In the UK, large multinationals – many of which are headquartered overseas – are helping to drive the UK’s transition to net zero through activities such as offshore wind farm development.
A UK pCbCR law would demonstrate how these businesses are declaring profits and paying tax in the UK – where staff and assets are being deployed and economic value is being created.
For example, net-zero champions Iberdrola, Ørsted, Vattenfall and SSE – all Fair Tax Mark businesses operating in the UK – made combined corporation tax payments of £630mn to the UK government over their most recent reporting cycles.
With Australia and the EU forcing large multinationals into a form of reporting (and Australia’s scheme somewhat complementing the EU’s by design), the UK could be the next major economy to enact a pCbCR law and continue the push for worldwide corporate tax transparency.
In fact, the UK should be well placed to move swiftly on this front. In 2016, under all-party pressure from Parliament, the UK government agreed that pCbCR was merited and accepted an amendment to the Finance Bill. This enshrined support for pCbCR in law, with the power for its possible introduction at an appropriate time – which is most definitely now, given that the pressure of being a first mover has eased.
Fair Tax Mark businesses ahead of the curve
We know the value of corporate income tax payments made in the UK and other countries by Fair Tax Mark businesses such as Iberdrola, Ørsted, Vattenfall and SSE because of their voluntary pCbCR disclosures.
And regardless of whether the UK passes formal pCbCR legislation, businesses that are Fair Tax Mark certified are well placed to transition painlessly to a world where a step change in tax transparency is increasingly expected, if not yet a fully mandatory requirement – because pCbCR is already a requirement for multinational businesses to gain the Fair Tax Mark.
Our updated pCbCR paper details the full set of data we expect multinational businesses to report, on a CbC basis, with an accompanying narrative explanation. We have also prepared a CbC reporting table that can be used. If completed fully, this would score maximum points in section three of our Global Multinational Business Standard assessment.
The Fair Tax Foundation work with businesses collaboratively on pCbCR and all other elements of the Fair Tax Mark. We offer a supportive space for discussions about making public reporting more meaningful and informative. So, don’t hesitate to get in touch with any questions or apply to become certified.
