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Campaigners welcome PM’s pledge on tax and transparency

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Tax campaigners gave a cautious welcome to the prime minister’s pledge yesterday to push for greater transparency in business taxes. David Cameron gave the strongest indication yet that the UK may sign up to the extractive industries transparency initiative (EITI), but in the past week the government has stood firm against calls for all multinationals to be required to adopt country-by-reporting of profits and taxes paid.

More than half of the 52 FTSE 100 bosses who responded to an MP’s invitation to back broader country-by-reporting have opposed the reform, the Daily Telegraph reported today, but Cameron said City businesses had been among those lobbying for government action on taxation of multinationals.

Cameron said the UK government would use its G8 presidency  to push for ‘more openness’ on trade; ‘a more serious debate’ on tax evasion and avoidance; and greater transparency, ‘shining a light on company ownership, land ownership and where money flows from and to’.

‘Turbo-boosters’

‘This is critical to developing countries,’ Cameron said. ‘Now as co-chair of the UN high level panel and with the presidency of the G8, there is a chance to put turbo-boosters under this agenda and we’re seizing that chance. I want this G8 to lead a big push for transparency across the developing world.

‘To illustrate why, let me give you one example. A few years back a transparency initiative exposed a huge black hole in Nigeria’s finances – an $800m discrepancy between companies’ payments and government’s receipts for oil. This is leading to new regulation of Nigeria’s oil sector – so the richness of the earth can actually enrich the people of that country. And the potential is staggering.

‘Last year Nigerian oil exports were worth almost $100bn, more than total net aid to the whole of sub-Saharan Africa. Put simply, unleashing the natural resources in these countries dwarfs anything aid can achieve – and transparency is critical to that.

‘So we’re going to push for more transparency on who owns companies, on who’s buying up land and for what purpose, on how governments spend their money, on how gas, oil and mining companies operate, on who is hiding stolen assets and how we recover and return them.’

‘All the right language’

The Times quoted John Christensen, director of the Tax Justice Network, as saying Cameron was ‘talking all the right language’ but that it remained to be seen what concrete steps would be taken.

But the Daily Telegraph reported that 32 out of 52 FTSE 100 bosses had warned against ‘publishing more details of their tax affairs’.

As Tax Journal reported last November, Conservative MP Stephen McPartland wrote to the chief executives of all FTSE 100 companies seeking their support for a new international accounting standard requiring country-by-country reporting of profits and taxes paid.

Today’s Telegraph reported: ‘Two of Britain's major supermarkets – which are losing business to offshore-based internet firms – had some controversial suggestions. Sainsbury's said that the information should be disclosed to allow consumers to boycott firms not paying tax in this country, while Morrisons urged chancellor George Osborne to force firms to disclose annual corporation tax payments.’

But the paper reported that, among the letters posted on McPartland’s website, BT chief executive Ian Livingston’s response warned against imposing more red tape on companies: ‘Any money spent on reporting is money that could be spent on investment and it’s investment that’s the top priority at present.’

UK government

In a Commons written answer published on Tuesday, exchequer secretary David Gauke said: ‘The issue of country-by-country reporting has been extensively discussed with representatives from both civil society and industry in the context of the proposed EU accounting directive. The government believes the best way to make progress in this area is to support the EU proposals to improve transparency in the extractives (gas, oil and mining) and forestry sectors.’

During a Commons debate last week on tax in developing countries Sir Malcolm Bruce, chairman of the Commons international development committee, said country-by-country reporting was ‘a really important starting point for getting transparency that works’.

However, Lynne Featherstone, parliamentary under secretary for the Department for International Development, told Bruce that the ‘broader’ country-to-country reporting model had been discussed in the OECD task force on tax and development, ‘without any consensus being reached on its merits’.

She added: The government believes that the case has not been made for the effectiveness of this model in achieving its objectives while minimising costs to business. It is not being called for by developing countries.’

Last August the committee said the UK government should enact legislation requiring each UK-based multinational corporation to report its financial information on a country-by-country basis.

Businesses ‘lobbying for reform’

Cameron said yesterday that business and finance professionals had been among those lobbying for tax reform. ‘Poor business practice doesn’t operate in a vacuum – it hurts the good,’ he said.

‘When one company doesn’t pay the taxes they owe, then other companies end up paying more. When some cowboys play the system all businesses suffer the fall-out to their reputation. That’s why it’s not just those in the NGOs who have been lobbying my government on these issues, it’s those in the high-rises of the City of London – bankers, lawyers, senior figures in finance. They’ve told us to pursue this agenda hard – and that’s what we’re going to do.’

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