UK ‘leading’ country-by-country reporting, claims Treasury
THE UK is the first of 44 countries to commit to the new country-by-country reporting model, the Treasury has confirmed.
Put forward by the OECD last week as part of a wider movement against tax avoidance by large corporations, UK-based multinationals will have to report to HMRC where they make profits and pay taxes around the world.
The system is designed to help tax authorities gather information on multinational companies’ global activities, profits and taxes, enabling them to better assess where risks lie and where their efforts to counter tax avoidance should be focused.
The OECD’s recommendations – set out in seven detailed reports – have been hailed as a significant shift toward co-ordinated international action against such activity – which is predicated on exploiting discrepancies between different jurisdictions’ tax codes – and tilting the balance of power towards the G20’s tax authorities.
Companies including Google, Amazon and Starbucks have been in the firing line for their use of offshore jurisdictions to drive down their UK tax liabilities.
In particular, the companies have been using transfer pricing, which some claim has the effect of mitigating their liabilities. The method sees multinational corporations value and purchase goods and services moving across international borders from one of the group’s corporate entities to another. An ‘arm’s length’ principle is usually applied to ensure the transaction is made at market value, but there have been questions raised over whether all companies do so in practice.
The OECD will present the reporting template to G20 finance ministers this weekend.
Financial secretary to the Treasury David Gauke (pictured) said: “The UK has been at the forefront of tackling international tax avoidance.
“We believe that country-by-country reporting will improve transparency and help identify risks for tax avoidance – that’s why we’re formally committing to it. In time, improved transparency between business and tax authorities will also help developing countries in dealing with compliance, as they often lack the capacity to collect this information themselves.
“Reporting high level information using a standardised format across all jurisdictions will ensure consistency, give tax authorities the information they need and minimise the additional administration burden on business.”