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Survey indicates opposition to country by country reporting standard

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Just three respondents in a Christian Aid survey of FTSE 100 companies supported new international accounting standards to require country by country reporting, but the charity has told Tax Journal that there is ‘a growing consensus’ on the need for greater transparency in tax.

In a new report, ‘Shifting Sands: Tax, Transparency and Multinational Companies’, Christian Aid said developing countries seeking to strengthen their tax base and protect revenues face a set of common challenges.

'Revenue authorities are often weak and fail to collect the taxes they should; the size of the informal sector makes monitoring of economic activities and the collection of taxes a huge challenge; countries are ill-equipped to monitor and effectively tax international financial flows; and there is a lack of accountability regarding agreements with and the operations of multinational companies and the taxes they pay,’  it said.

Last month the charity welcomed the European Commission’s consultation on country by country reporting, claiming that additional information provided under such a regime would help developing countries ‘crack down on the tax dodging which currently costs them more than they receive in aid’.

The charity asked the CEOs of the FTSE 100 companies to complete a survey about tax, development and country by country reporting. Sixteen responded by letter, and of the 20 respondents who completed the survey:

  • 19 agreed that ‘tax is a vital source of income for developing countries’ and ‘multinational companies should fully comply with tax laws in the countries in which they operate’;
  • 12 agreed that ‘payment of tax in developing countries should form a key part of an organisation’s corporate social responsibility commitment’;
  • 7 agreed that ‘reporting of tax payments by multinational companies may be beneficial to the development agenda’; and
  • 12 agreed that their firm is ‘persuaded of the need for greater transparency for developing countries’.

The charity observed that this is ‘a controversial and sensitive area’ and some companies ‘feel that this is an anti-business campaign and are unwilling to discuss these issues’.

Others feel that the focus should be on strengthening poor countries’ tax authorities. But some, recognising the long-term trend is towards transparency, want to be ‘ahead of the game’. Tax directors of ‘many major companies’ are ‘now agreed that the compliance cost should not be a constraint’.

Some respondents raised concerns about the disclosure of commercially sensitive information, which ‘puts them at a competitive disadvantage’. Christian Aid said that if the reporting standard were applied globally, ‘no major listed company would be able hold an advantage by having undisclosed information’.

A Christian Aid spokesperson told Tax Journal: ‘While there is disagreement on the idea of the International Accounting Standards Board taking forward country-by-country reporting, there is a growing consensus on the need for greater transparency and detailed discussions among policymakers about how to take it forward.’

‘Unsurprisingly, companies are cool about these initiatives,’ a Financial Times report suggested last week, even if they are sympathetic to charities’ goals of improving tax collection in developing countries.

‘One exception is Standard Chartered. The global bank has already made a start on publishing accounts for individual countries, but it wants a level playing field,’ it added.

The paper quoted Dan Mobley, the bank’s Group Head of Government Relations, as saying: ‘We cannot justify spending a lot of resources if our competitors are not. We need civil society to push on this.’