Nils Pratley comments in the Guardian today:
So now we know, privately owned Alliance Boots paid £240m in tax in the UK last year. It said so in a slide presented alongside yesterday's annual results that was designed to dispel "any misunderstanding".
Hold on a minute, the company's definition of tax in its slideshow is not the one it uses when presenting the financial results themselves. That's because the £240m includes business rates and employers' national insurance. Those do indeed represent income for the exchequer. But the fuss is about corporation tax. So, for the sake of full understanding, tell us how much was paid in the UK on that front.
Alliance Boots declines to say, beyond confirming that it did pay some corporation tax in the UK. It is an international operation these days and is under no obligation to give a country-by-country breakdown of its corporate tax payments.
Well, it should make that disclosure. We grant Boots a licence to operate in this country: we have a right to know how much tax it pays in exchange and if it fails to disclose that then by any reasonable criteria it's failing in its corporate responsibilities.
What is more, there is on the agenda of the European Union, Organisation for Economic Cooperation and Development and International Accounting Standards Board a proposal that would make Boots disclose how much tax it pays in the UK. That proposal is for an accounting disclosure regime that I admit I created: it's called country-by-country reporting.
Country-by-country reporting is conceptually simple. It says a multinational corporations (and Boots is a multinational) should disclose a profit and loss account and cash flow plus limited balance sheet information for every country in which it trades unless the amounts involved are tiny. That profit and loss account and cash flow would include full details of tax provided and paid. So we'd know how much Boots owed and paid in the UK.
All it needs is political will from our politicians and those in the EU and we could have this data, for the benefit of us all, so we could hold these companies to account and stop their gross misinformation on how much tax they pay.
We might get more tax too as a result. And that would be good.
Full details on country-by-country reporting here.
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I am unsure how your country-by-country reporting will result in more tax being received in the UK? Are you suggesting that companies like Alliance Boots are under declaring their taxable income in the UK. Somehow I don’t think you are.
Anyway, what is the point of having income and tax figures without knowing how the tax charge was computed. Next you will probably want publication of companies tax returns and assessments.
And why not?
After all, we give them liability
Tax and transparency are the price
But let’s start with country-by-country reporting
And you may think it may not improve tax yield but I can assure you HMRC have said it undoubtedly would
I am still confused about your link between limited liability and corporation tax.
1) As I understand the history of it, limited liability was introduced to reduce the risk (and therefore the cost) of accumulating the large amounts of capital required for large-scale projects required as part of the industrial revolution. I have never read anything suggesting it was done as a ‘licence’ for which companies were expected to pay through taxes. Is there any historical evidence for this?
2) You suggest tax must be paid as if it were a fee for limited liability. Limited liability is not in any way linked to how much tax the company pays, if any.
3) Even if we accept your argument that tax is the price for limited liability, it isn’t the company that has limited liability. ‘Limited liability’ refers to the liability of the shareholders for debts of the company, not the liability of the company itself for its own debts. A company’s liability for its own debts is unlimited — down to the last penny. If tax is the price for limited liability as you suggest, surely that is an argument for taxing at the shareholder level, not the company level.
And of course not all companies have limited liability – some have unlimited liability. By logical extension Richard would not charge the profits of an unlimited company to corporation tax.
This is further proof that there is in fact no link between the concept of limited liability and the payment of corporation tax.
Corporation tax is charged because a company makes profits. Simple as that. Nothing to do with liability.
Other relationships exist in case of unlimited liability
Pedantry is not argument
Who will police the country by country analysis? Will it be part of the Audit process?
Yes it is time the Tax charge in Accounts was made transparent
I am afraid we would have to rely on auditors…