THE INFLUENTIAL Public Accounts Committee has welcomed the introduction of country-by-country (CbC) reporting as a means for HMRC to check if multinationals are paying the right amount of UK tax.
But in its annual review of HMRC’s performance, the cross-party committee lamented the fact it would only be HMRC that would see how much tax multinationals were paying – because the information will be supplied on a confidential basis.
The PAC report said: “We welcome the introduction of country-by-country reporting of the activities of multinational companies, but this will not provide the much needed transparency over their tax affairs as the information will be supplied to HMRC on a confidential basis.
Until now UK and other tax officials have struggled to untangle the information multinationals supply to tax authorities to determine if companies are paying the ‘right’ amount of tax in each country because they report on a global basis.
With the increased scrutiny on multinationals such as Apple, Starbucks and Google, which have often paid little or no tax in certain jurisdictions where they operate, tax authorities around the world have joined together to create new global tax rules to curb corporate tax avoidance.
CbC reporting is the latest of those new tax rules, which was implemented in the UK this year. The US and EU member states have also implemented, or are due to implement, CbC reporting rules.
HMRC told the PAC that CbC reporting would provide it with better data on where multinationals were raising their revenues and help it in determining cases for investigation and risk assessment.
The tax office said if it believed multinationals had not paid the correct amount of tax it would investigate. HMRC estimates that the introduction of the new tax rules will bring in an extra £65m in taxes.
In its report the PAC said: “HMRC and HM Treasury need to make the tax affairs of large multinational companies more transparent to increase the pressure on them to pay their fair share of tax.”
To do this the committee recommends that HMRC and HM Treasury lead the global debate for public CbC reporting and push for international agreement.
Like the PAC, the government is in favour of multinationals’ tax bills being made public, but will not force companies to make the information public until the rules are implemented on a multilateral or international basis.