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Treasury softens line on country-by-country reporting

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The UK government appeared to have softened its line on country-by-country reporting for all multinationals last week, as the Treasury’s spokesperson in the House of Lords told peers that it was ‘currently looking’ at the proposal.

The government has voiced support in recent weeks for the Extractive Industries Transparency Initiative but has argued that ‘the case has not been made’ for a broader country-by-country reporting regime. Press reports earlier this month suggested that the Treasury may now back such a regime.

Lord Newby was asked by the Labour peer Lords Wills on 14 March what consideration the government was giving to ‘persuading the G8 to require multinational corporations to produce country-by-country reporting of their tax payments so that not only can the tax authorities in developing countries be better informed about what these companies are paying but the people of those countries can be better informed, so that they can hold those companies and their own states better to account’.

Lord Newby replied: ‘The government support country-by-country reporting for the extractive industries, where some of the worst abuses are taking place. We are currently looking at broader proposals for country-by-country reporting. On the point about expanding the principle more widely, we want to make sure that we get the costs and benefits right.’

In January Catherine McKinnell, shadow exchequer secretary to the Treasury, asked what discussions the chancellor had had with the international development secretary on the introduction of ‘country-by-country reporting of financial information by UK-based multinational corporations’.

Exchequer secretary David Gauke told her: ‘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.’

In an earlier debate on tax in developing countries, Lynne Featherstone, parliamentary under-secretary for international development, said 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.’

Some tax experts have argued that detailed country-to-country reporting will not help those seeking to hold companies and governments to account. Yesterday the law firm Berwin Leighton Paisner warned that ‘increasingly detailed breakdowns could serve to confuse or obscure rather than illuminate the reality of how a business is performing’.

Earlier this month Dave Hartnett, former permanent secretary for tax at HMRC, told Tax Journal that country-by-country reporting could result in ‘crude comparison’ of a multinational’s tax bills in different countries.