Caroline Lucas MP, leader of the UK Green Party, has today tabled a Bill in the House of Commons that would require country-by-country reporting by all UK companies for all their activities.
Clause 3 of her Tax and Financial Transparency Bill 2011 says:
Financial transparency: companies and trusts
(1)Every company, including a parent company, incorporated in or operating in the United Kingdom must publish in its annual financial statements prepared in accordance with the requirements of the Companies Act 2006 an analysis of the consolidated turnover and profit made by it in each jurisdiction in which it has a permanent establishment for taxation purposes as defined by section 1119 of the Corporation Tax Act 2010 and the resulting taxation liability due and payment made by that company and its group (if applicable) in each such jurisdiction, without exception being made on the grounds of immateriality.
(2)Such trusts, organisations and other bodies to be set out in regulations made by the Secretary of State shall be subject to the provisions of subsection (1).
(3)Regulations under this section may make such incidental or transitional provision as the Secretary of State considers appropriate.
(4)Regulations under this section shall be made by statutory instrument and shall 35be subject to annulment in pursuance of a resolution of either House of Parliament.
(5)In this section—
“company” means a company registered under the Companies Act 2006 in the United Kingdom and all its subsidiary companies; and
“operating in the United Kingdom” includes trading, acting charitably or making donations for political purposes.
This is country-by-country reporting reduced to its most basic form, but the Bill is important for a number of reasons.
First, this is the first time such legislation has been presented in this form in the UK.
Second this is the full version of country-by-country reporting, and is not restricted to the extractive industries.
Third, there is clear sign that the Bill will receive useful support. Labour shadow ministers have indicated support as have some Lib Dems. This is very welcome.
Fourthly, limited as this form of country-by-country reporting is it lets us answer what might be called 'the Barclays' question'. That is, what proportion of your trade was here, what proportion of your profit was here, what rate of tax do you expect to pay on that and how much did you actually settle (which lets us have some idea on the current /deferred tax split).
With these disclosed UK financially transparency would leap forward. Which is why this Bill deserves to become law.
But I should disclose that I worked on this Bill with Caroline Lucas, so I may be biased.
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This is the service we get with one single Green MP, 1/650 of representation in the Commons. Can we imagine how much better off we would be with 20-60 Green MPs, as its real first preference voting support would entitle it to.
@Strategist
Indeed!
Vote AV
Good idea RM – but how on earth will it be policed?
Will it become part of Audit procedures for example?
And for those companies with no Audit requirement ………..?
@Stephen Griffiths
For medium and large companies this would be an audit requirement
For small just a legal obligation – and these I admit are not policed
But they’re also not multinational corporations in most cases
This will be easy to dodge. Look into the interpretation of this sentence: “and the resulting taxation liability due and payment made by that company and its group (if applicable) in each such jurisdiction”
Pretty easy to change the UK subsidiary owned by Cayman’s HQ into a different structure where it will no longer be considered to be in the ‘group’.
@fred G
You really don’t understand much do you?
So it’s not in the group – minor issue of a sale then, and not consolidating the profit
I’m sure the group shareholders will be delighted to know their interests are being given away to avoid a tax disclosure