The history of country by country reporting (CBCR) goes back to 2003, but I will focus here on the recent significant milestones, and what we might see next.
Most people are familiar with the CBCR proposals in BEPS Action 13, and legislation has been finalized in nearly 20 countries, including the UK. A similar number are moving in that direction. This will mean that most large multinationals will soon be required to collate CBCR information and share it with tax authorities.
The debate as to whether CBCR data should be made public was never far from the OECD agenda, and has been seen by civil society as essential. The OECD maintained a firm non-public position, so many were surprised when George Osborne told a meeting of EU finance ministers in February that the UK would be supporting multilateral moves towards public CBCR.
Alongside this, in April 2016 the European Commission published a proposal that all large multinationals operating in the EU, wherever headquartered, would be required to publish CBCR data for each EU member state and any tax havens, and aggregated data for the rest of the world. A draft EU Directive remains under discussion, and although it is unlikely the UK would adopt this Directive following the Brexit vote, the requirements could apply to UK multinationals.
The Finance Bill: Fast forward to the Finance Bill amendments debated on 5 September, and you find a short, 13 word amendment put forward by Labour’s Caroline Flint, with cross-party support from 60 MPs. It simply states that public CBCR may be added to the requirement to publish a UK tax strategy.
This was a good piece of politics. The amendment was enabling legislation. It puts in place a mechanism under which the UK may introduce public CBCR through a statutory instrument, but there is no obligation to do so, and certainly no timescale set.
When Jane Ellison MP, financial secretary to the Treasury, rose to respond, she surprised some by saying that the government would ‘fully support the intentions’ of the amendment and ‘support its inclusion in the Bill’.
The future: The UK government is under pressure from the public, media, and NGOs to increase transparency over the tax affairs of multinationals. However, there are mounting tensions between the US and EU over tax policy and the impact on US multinationals. The US does not support public CBCR. Indeed, Bob Stack of the US Treasury has said that the US would stop sharing CBCR data with other tax authorities if they make the information public.
Jane Ellison reiterated the UK aim of a multilateral approach, although she didn’t define multilateral. There is still a way to go before there is international support for public CBCR, which the government wants to see before pushing the button, so we are unlikely to see public CBCR anytime soon. That is, unless we see a change in policy.
Implications for business: In the short-term, businesses are focused on BEPS CBCR. However, this amendment should be seen as another indicator that the data is likely to be in the public domain, sooner or later. Whether you believe this is more likely as a result of governance failures and leaks, or the adoption of a public requirement, the same issue remains. A wide range of stakeholders, from governments and civil society to customers, competitors and predators may soon have access to data many multinationals didn’t even know about themselves until recently.
Many now accept that CBCR data is unlikely to remain confidential for long. Businesses need to start considering not only the commercial and reputational implications, but also whether there are opportunities to start telling their story.
Home >Articles > The Finance Bill change for public CBCR
The Finance Bill change for public CBCR
The history of country by country reporting (CBCR) goes back to 2003, but I will focus here on the recent significant milestones, and what we might see next.
Most people are familiar with the CBCR proposals in BEPS Action 13, and legislation has been finalized in nearly 20 countries, including the UK. A similar number are moving in that direction. This will mean that most large multinationals will soon be required to collate CBCR information and share it with tax authorities.
The debate as to whether CBCR data should be made public was never far from the OECD agenda, and has been seen by civil society as essential. The OECD maintained a firm non-public position, so many were surprised when George Osborne told a meeting of EU finance ministers in February that the UK would be supporting multilateral moves towards public CBCR.
Alongside this, in April 2016 the European Commission published a proposal that all large multinationals operating in the EU, wherever headquartered, would be required to publish CBCR data for each EU member state and any tax havens, and aggregated data for the rest of the world. A draft EU Directive remains under discussion, and although it is unlikely the UK would adopt this Directive following the Brexit vote, the requirements could apply to UK multinationals.
The Finance Bill: Fast forward to the Finance Bill amendments debated on 5 September, and you find a short, 13 word amendment put forward by Labour’s Caroline Flint, with cross-party support from 60 MPs. It simply states that public CBCR may be added to the requirement to publish a UK tax strategy.
This was a good piece of politics. The amendment was enabling legislation. It puts in place a mechanism under which the UK may introduce public CBCR through a statutory instrument, but there is no obligation to do so, and certainly no timescale set.
When Jane Ellison MP, financial secretary to the Treasury, rose to respond, she surprised some by saying that the government would ‘fully support the intentions’ of the amendment and ‘support its inclusion in the Bill’.
The future: The UK government is under pressure from the public, media, and NGOs to increase transparency over the tax affairs of multinationals. However, there are mounting tensions between the US and EU over tax policy and the impact on US multinationals. The US does not support public CBCR. Indeed, Bob Stack of the US Treasury has said that the US would stop sharing CBCR data with other tax authorities if they make the information public.
Jane Ellison reiterated the UK aim of a multilateral approach, although she didn’t define multilateral. There is still a way to go before there is international support for public CBCR, which the government wants to see before pushing the button, so we are unlikely to see public CBCR anytime soon. That is, unless we see a change in policy.
Implications for business: In the short-term, businesses are focused on BEPS CBCR. However, this amendment should be seen as another indicator that the data is likely to be in the public domain, sooner or later. Whether you believe this is more likely as a result of governance failures and leaks, or the adoption of a public requirement, the same issue remains. A wide range of stakeholders, from governments and civil society to customers, competitors and predators may soon have access to data many multinationals didn’t even know about themselves until recently.
Many now accept that CBCR data is unlikely to remain confidential for long. Businesses need to start considering not only the commercial and reputational implications, but also whether there are opportunities to start telling their story.
