There is a fascinating article on country-by-country reporting and the Base Erosion and Profits Shifting process in this morning's Tax Analysts (behind a paywall). There is much I could comment on but one paragraph jumped out, which said:
At a recent conference in Washington, Mike Williams, director, business international tax at HM Treasury, said he is "worried about the cost" to HM Revenue & Customs of receiving all this information [i.e. the data on country-by-country reporting] and transmitting it. The information requested by the templates will be useful to tax administrations only if they have the systems, tools, and personnel to wade through and derive meaning from large quantities of data, and most government budgets won't allow for a revamp to properly evaluate that data.
That's a very significant claim. What Williams is saying is that the information to ensure that large companies do pay the right amount of tax, in the right place and at the right time could exist if country-by-country reporting data was supplied to authorities like his own, but that governments have no inclination to use that information to ensure that this right amount of tax is paid.
I readily admit that I'm not wholly objective on this issue: as the creator of country-by-country reporting of course I have a bias towards it, but what we are seeing in this comment is something that I have long suspected. What it says is that the in-principle opposition to country-by-country reporting does not only come from within the business community, it also comes from within government. What Williams is saying is that CbC could increase government revenue, but that the government is not willing to use the information to raise that revenue, even though very obviously it would be cost-effective to do so. The objection he raises to country-by-country reporting is not then practical, but is instead ideological.
This is of course the ideology of neoliberalism. It is however a very perverted logic. What Williams is saying is that country-by-country reporting would undermine the supposed ability of multinational corporations to compete through the use of tax abuse, tax havens, secrecy, tax avoidance and tax arbitrage and that the UK government does not believe that, for these corporations at least, restricting their ability to undertake such activity is appropriate.
Williams is, of course, wholly wrong. First of all the whole purpose of the Base Erosion and Profits Shifting project, to which David Cameron supposedly so enthusiastically signed up, is to prevent the sort of tax abuse which country-by-country reporting should restrict through disclosure of its existence. To now oppose CbC or to refuse to use the data it supplies simply reveals hypocrisy in David Cameron's position. I would not have thought it was Williams' job to do that, but if it is then it is clear that such hypocrisy does exist.
Secondly, the whole logic of this opposition is wrong. The ability of multinational corporations to compete through the use of tax abuse, tax havens, secrecy, tax avoidance and tax arbitrage is, of course, entirely anti-competitive. Such a process of abuse may, of course, let these companies maximise their profits at expense to others, but in the process it also fundamentally undermines the level playing field on which all business should compete if markets are to provide the benefit to society that is it is claimed they can deliver. That is because this abuse undermines nationally-based companies and smaller companies, both of which groups do not have the advantage that multinational companies enjoy, with the tacit support of HMRC and the UK government, to undertake international tax avoidance and profit shifting.
This though, in itself reveals something else which is also of significance and which many in the UK business community should note, with care. What the UK government is, effectively saying, through Williams' words, is that it does not believe in fair competition. What it believes in is supporting the winners, and the winners as far as it is concerned are those who are already at the top. What it is, then, willing to do, is to stack the odds in favour of those already in advantageous positions. The result, is, of course, an increase in inequality in society at large, and within the business community. Both cost us dear.
This is why I welcome political commitments to corporate transparency. Such transparency and the willingness to use the resulting data for the good of all in society is vital if we are to create a country in which everyone can prosper, including businesses of all sizes, which is something I firmly believe in.
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Richard
I can’t see where Mike Williams admits that country by country reporting would do any of the things you suggest he says
He jsst appears to be saying it will only be useful with a great deal of cost, which is entirely different. His point is that it will be costly to be useful
I don’t know how useful he thinks it will be. Does he actually suggest that it will result in any additional revenue? I think you might have misunderstood his point
Respectfully, I disagree
Wihth the last point, sure, but you’ve read the whole article
Is there anything a bit more compelling than the paragraph you’ve selected? Because I think he’s making a practical point there rather than an ideological one
Williams looks like he is saying it would cost a lot to implement country by country reporting. He doesn’t say anything about the benefits attached to it
May I suggest that a more obvious conclusion would be that Williams thinks the benefits attached to country by country reporting are less than the cost that would have to be incurred to implement it?
Without further information, I think it is at leasy an eqully valid conclusion as yours
Then why did his boss argue for it, so vociferously?
I can’t see why that means Mr Williams commented are not related to practical problems
In fact, your point suggests his comment should be construed as a practical problem rather than an ideological one
I take it there wasn’t any more compelling quotes in the article then?
Maybe you’re not quite as familiar with the nuancing of such statements as I have become
There are 2 possibilities:
1 THere is nuance. In which case, I think the main problem with your post is that you haven’t justified to impartial readers why they should infer the nuance that you think is there. I know nothing about Mr Williams so it just doesn’t follow to me that I can infer a practical problem is being highlighted for ideological reasons
2 There is no nuance. In which case, you’ve just made up the nuance, which just seems a bit like putting words in Mr Williams mouth, don’t yuou think?
I think you probabvly should explain why you think Mr Williams comment needs to not be taken at face value firstly. If you can’t do thaat , the default position should be to take Mr Williams atr face value
You should do that with everybody really, otheriswe you’;re just arguing agaiunst your own preconceptions which says more about you than anything else
There are two very good reasons not to take Mr Williams’ comments at face value.
The first is that I have heard him speaking before, and his comments are often consistent with a general lack of willing to impose any form of regulatory burden upon big business, consistent with the argument of neoliberals and many in government to suggest that this would lead to a flight of companies from the UK, which is a position to which he appears to subscribe.
Secondly, the UK is working as hard as it can behind the scenes within Europe and elsewhere to make sure that country by country reporting does not happen. It has, for example, been a major objector to it being included in the latest EU accounting directives.
In both cases my cynicism is based entirely upon observation of UK government policy. I am not in the business of making up conspiracy theories for the sake of it: there are plenty enough conspiracies out there to avoid any need to do that.
That is an important point missing form your post – a reader needs to know that you think Mr Williams comments cannot be taken at face value in order to arrive at similar conclusioons
I have to say that I still dont’ agree that you can deduce there is nuance in this instance. It does seem a relevant practical point,m so even inferring a mischievous motive for the comment doesn’t mean you can ignore it
Persona;lly, I think it is better to address the point he makes rather than to require your readers to guess that Mr Williams cannot be taken at face valuie. I mean, we know you think it’d be worth itm, but that’s the real point isn’t it?
If it costs loadfs but brings in loafs of revenue that’s fine. THat seems a sensible argument, doesn’t it? And it aviods you looking like you’ve got a personal issue with Mr Willaims, which is whaty I read into your post, if i’m being honest
I guess that I was actually right though. It does sound from your last comment like your position is based on who made the point reather than what the point is
No problem with that, you were honest that your argument is based on your peronsal view of Mr Williams
Richard
It just occurred to me that the paragraph you’ve quoted doesn’t actually contain a substantial quote from Mr Williams. The nuance you are reading is actually going to be from Tax Analysts rather than Mr Williams.
That’s one of the prbolems of reading second-hand sources. Are there any direct quotes other than the phrase “worried about the cost”?
I don’t think four words are sufficient to read nuance into
I have heard Williams on this theme
It is familiar mood music from HMRC now
Richard
That last ocmment I mean “you” in the third person sense, not “you” personally. PLease don’t take it as a personal reference because that’s not how it’s intended. I was just htinkning about the problems of reading other people’s motvies into what they said and realised you could take that comment the wrong wat
Jeremy
Throughout your exchange with Richard, you seem to exclude the possibility that what Williams says contains both nuance and a comment on the practicality of country by country reporting. They are not mutually exclusive. The fact that it contains the latter is clear from Richard’s quote. But one doesn’t have to know Mr Williams, or have heard him speak (which describes my position) to recognise that the people who occupy such senior positions in government departments or agencies, such as HMRC, or the civil service more generally, seldom speak about matters that relate very closely to ongoing policy development issues and concerns without the use of nuance. Indeed, many of the senior public servants I’ve heard speak over the past two decades have been very skilled in the use of nuance (think Yes Minister, if you’re old enough to remember that BBC TV classic).
Importantly, for those schooled in the art of “policy nuance” as we might refer to it – and there will have been a fair few of them at the Washington conference at which Williams was speaking, I’m sure – an important reason for attending would have been to spot the nuances; and an equally important reason for being a speaker would have been to convey certain messages – tips and hints about current thinking on policy, legislation and so on, perhaps – through suitably nuanced, but otherwise seemingly “matter of fact” statements or comments, to the assembled audience.
The reasons for this less than transparent approach to communication are ancient and varied and so outside the scope of this comment. But I’d hazard a guess that as far as this specific example goes, the intent was to let the audience know that whatever might be said in public by our government, in practice there’s no interest in implementing country by country reporting. And if the reason for that has to come down to administrative cost then so be it. Basically, a reason will be found. The information Richard provides about what the UK government is up to within the EU would support that conclusion, I think. I’m sure that the “message” contained within Mr Williams comment (whether the nuance was spotted or not) was much appreciated by many of those in his audience.
Ivan
I’m sure your last point is right
Ernst & Young would have been wetting themselves with delight
Richard
Ivan
I say what I mean, and I mean what I say. And I do get nuance. But I don’t see how you arrive at that opinion without reading something into my comments that I haven’t said. My post at 2:42 clearly accepts the possibility of Mr Williams statement containing nuance
I suppose,. to put it in your terms, I’m just saying that Richard has excluded the possibility of there not being nuance. I think that’s obvious but I can see how if you’re busy reading nuance into things you might miss it
Let me assure you, Williams does not ever talk without nuance
Nor does any senior civil servant
And Ivan has perfectly read the type of meeting he was at
Have you ever partaken in any such event?
Were either of you at the meeting in question? Or have you seen a direct quote?
Nuance is, by definition, subtle. If you’re reading somebody else’s interpretation of his comments, Mr William’s nuance is lost
I cannot see why it is not a possibility that he is not talking with nuance about a genuine issue. Or the nuance is a request for more funding for HMRC rather than neoliberalism. Without your thinking on Mr Williams, none of this is apparent from your orign al post
Those seem possible interpretations and your interpreation is only one of many
I think that your and Ivan’s preconceptions about nuance might be preventing you from interpreting Mr Williams’ comments in an open manner
I’ve seen plenty of civil servants beat around the bush with their comments and allude to more than they say, but I can’t see how you can extrapolate your main point from what he’s being paraphrased as saying
Sorry, there’s little point disagreeing any more. I might eventually agree your conclusions should I meet Mr Williams and form a similar opinion, but I can’t simply adopt your preconceptions about him
As I said, I say what I mean and I mean what I say. I extend others the courtesy of taking their comments in the same way until they give me reason to think otherwise. I just think its the right thing to do
You are, to be polite, becoming very tedious
Are you paid to write this stuff?
This is your last comment on the issue
Since you asked me a question, I feel it is only right that you give me opportunity to respond
(Written without nuance) No. I am not being paid to write this stuff.
Either way, that is definitely your last contribution on this issue
Should the word ‘not’ come after the word ‘will’ in your heading.
I am not trying to be pedantic, but rather to make the point there is a will. Just not one you and I approve of.
However, one question (assuming you agree with me there is a will on all of this – it is deliberate): if this represents the will of our democratic representatives, isn’t that just democracy in action. You and I may not like it, but we’re not elected, so we don’t get decide these things. Others do.
But then I am entitled to point it out
And a not where you suggest would make my already cumbersome headline style unintelligible to most
All compromises, if you like
“At a recent conference in Washington, Mike Williams, director, business international tax at HM Treasury, said he is “worried about the cost” to HM Revenue & Customs of receiving all this information [i.e. the data on country-by-country reporting] and transmitting it. The information requested by the templates will be useful to tax administrations only if they have the systems, tools, and personnel to wade through and derive meaning from large quantities of data, and most government budgets won’t allow for a revamp to properly evaluate that data.”
The estimated cost of both tax evasion and avoidance is around £120 billion. How much is implementing Country by Country reporting going to cost?
Even if it only recovered 10% of this total, or even 5%, it would be worthwhile, surely?
£6 billion returned to the treasury every year, while not huge, would still be significant!
Are they saying the outlay would not be worth the resultant gains of collecting a few billion pounds of taxation? That seems to me to be a ludicrous suggestion.
And remember how much multinational corporations have invested in creating these unreportable structures
@Steve0!
That 120bn figure is Richard Murphy’s number, and for all tax avoidance and evasion, not just for corporate tax avoidance. other estimates are far lower. HMRC estimate about 35bn, of which corporate tax avoidance is only a very small part.
So the 6bn you are talking about returned to the treasury every year would be a gross overestimate regardless of who you believe is correct on the tax gap.
The other question you have to ask is how much it would cost companies to comply with CbC reporting and HMRC to administer it. The likelihood and suggestion is that it would be a lot. You then have to ask that if corporate profits are lowered by the costs of CbC (meaning less tax to pay) and it costs HMRC a lot to administer the system, how much will the treasury really gain from it?
Actually, my estimate of this type of avoidance is currently £12 bn a year
You’re wrong
As ever
My estimate is currently being updated
OK, assumming your estimate is correct (which I doubt). How much of that, after direct costs and sustitution effects do you think CbC will recover for the treasury?
Why not £6 billion – if, of course, we were willing, as we should do, to tax all income of UK companies arising anywhere in the world
“Why not £6 billion — if, of course, we were willing, as we should do, to tax all income of UK companies arising anywhere in the world”
That’s not an answer. I would have assumed that if you have an estimate of the tax gap, and as the creator of CbC, you would have a working estimate on the amount of money it would generate for the treasury.
I would also have expected you to know that not all income of UK companies is taxable in the UK. In fact, your whole idea of CbC reporting is explicitly designed to have taxes paid where the revenues are generated. So what are you suggesting?
Your argument is absurd: I argue for source based priority, residential back up and unitary overlay to ensure taxes are paid at least once
But why bother with getting things right?
I am working on new estimates: I have said so
Compare abd contrast:
“Why not £6 billion — if, of course, we were willing, as we should do, to tax all income of UK companies arising anywhere in the world”
“Your argument is absurd: I argue for source based priority, residential back up and unitary overlay to ensure taxes are paid at least once”
First you say all UK companies should be taxed on their worldwide income – and the inference made with the 6bn figure is that it should be taxed in the UK, or at least some is being avoided by multinationals.
Then you say that CbC will solve this. Looking at the FTSE 100, most of those companies already generate the vast bulk of their profits overseas. So CbC won’t increase UK tax revenues.
Indeed, HMRC’s estimate (which you will simply declare as wrong) for corp tax avoidance is 4.7bn, of which only 1.1bn is from large companies. Which means that the likely revenues for the treasury from CbC are going to be very small, especially after costs are taken into account.
Do you understand source and resident based tax?
It seems you don’t
The sweetheart deals and arrangements for our multinationals have nothing to do with democracy – they are the result of corporate capture of the state. I’m sick and tired of the apologists out there that continue to paint black as white.
Sadly Mr Williams view is prevalent among the top echelons of HMRC due to a programme of indoctrination that has run for many years. The mistake they have made is awallowing the “business friendly” narrative hook line and sinker. The favourable measures in place for the multinationals have nothing to do with the free market or free trade and more akin to the receipt of “indulgences”.
I take a different slant on this; I think Country by Country reporting is a good idea
and ought to raise more revenue than its cost. Large companies and multinationals are favoured I have no doubt about that. My problems are rather on its practical
implementation on a world wide basis. Firstly on who is going to police it, and secondly if say, in extremis, the UK is the only country that does implement- how much revenue RM would you be prepared to sacrifice? Or how many UK services would you cut, how much unemployment would be acceptable? A lot of the world does not play by any rules, does liberal UK have to take all the burden?
Stephen
Who polices accounting standards? Can’t we rely on the Big 4 to do this? If not, why not?
And haven’t you noticed that the OECD is backing this, with the G 20 behind them?
Richard
“Then why did his boss argue for it, so vociferously?”
Doesn’t this prove Jeremy’s point, though? (And I agree with everything Jeremy wrote by the way). You are reading things into what Williams says without giving your readers any idea at all why this might be reasonable to do.
For example, who is his boss, and what did the boss say?
You can hardly expect your readers to trawl through every post you have written on this guy Williams. If you think he is speaking in nuance, spell out why, give examples, don’t let readers guess.
His boss is David Cameron
For guys who argue nuance you really can’t do it
An Australian perspective
http://www.macrobusiness.com.au/2014/03/apple-itax-stings-global-consumers/
Mr. Murphy — I’d like to clarify the portion of my article that you excerpted — only the first sentence of the paragraph is directly attributable to Mr. Williams. The second sentence is my own commentary based on his comments, as well as those of other government officials.
I am sorry if that was not clear
I am, however, not sure it changes the substance of what I said in any way, which read what was said in the context of many other comments and behaviours
Mindy, would you mind elaborating on whether you wanted readers to infer any of the things that Richard did? That’d help a great deal, thanks
I think that question to be utterly superfluous: I did infer what I said precisely because I know that Mike Williams has said such things, or things like them, before, in other places at other times, and on the basis of the actions that I know the UK government is taking behind the scenes to block country by country reporting. These are facts of which I’m certain and whether or not Mindy wished me to infer what I did from the statement is irrelevant: I did, understanding the context in which the comment was offered
If Williams works at the Treasury is his boss not Danny Alexander or George Osborne? If we argue Cameron is the Capo dei Capi then he’s in charge of so many people it just doesn’t seem plausible to accuse him of being in charge of everything.
I hold CEO’s to account
Your logic would suggest it is Gauke: not a basis for encouragement of anything