Labour's Tax review, published yesterday, includes the recommendation that:
Tax returns, related computations and documents of all large companies must be made publicly available. The public availability of corporate tax information will improve the quality of information available to parliamentary committees to scrutinise the effectiveness of HMRC in meeting its objectives.
I have to say that I disagree with this suggestion. I believe it inappropriate for a whole range of reasons, even if I am aware that by saying so I disagree with the demands made by Margaret Hodge on this issue, those made by many NGOs and now by Prem Sikka and some Tax Justice Network colleagues. There are two reasons why I do this: firstly because I think that publication of corporation tax returns would come way down the list of additional information that I would seek to be published to deliver tax justice and second because I very much doubt that such information would, in any event, be of much use to anyone, including tax campaigners whilst at the same time putting some quite unjustified information into the public domain. Let me deal with these issues in turn.
The additional information we need before we get to corporation tax returns
Before we ever get near the publication of tax returns by any company I think we need to have reported:
- Public country-by-country reporting for all large companies, without exception (which issue is not mentioned in the report);
- The full accounts as submitted to the shareholders of all companies, whatever their size, because maybe 90% of all companies are exempted from this requirement at present, meaning we have no information on their tax affairs at all, despite tax evasion amongst them being a much bigger problem than that of tax avoidance amongst multinational corporations;
- Verified data on the beneficial ownership of companies;
- Consolidated accounts for the accounts of all the UK trading subsidiaries of a foreign owned parent company whether those UK based companies are themselves directly grouped or not;
- Details of the intra-group trading of group companies (without exception), which is exempted from publication under the terms of IFRS 8 at present.
Improved tax notes to accounts, as we are pioneering in the Fair Tax Mark, would also be a priority.
I say all this for these reasons:
- The volume of data in corporation tax returns is enormous;
- There is no such thing as a group corporate tax return because groups aren't taxed as such, so the demand might actually require the publication of hundreds of separate returns, each of which in itself may make little sense;
- It is not clear whether the demand extends to foreign subsidiaries or not, but if not then it leaves a gaping void that only country-by-country reporting can fill;
- Without explanatory support notes that data would be almost meaningless to a lay user;
- Because of the volume of data the chance that anyone could make use of this information in any meaningful way would, I think, be remote.
In other words, the report makes recommendation of the publication of the wrong additional data at this time, in my opinion.
The right to confidentiality
There is, however, another reason, and I have made the point before. This is that corporation tax returns do include commercially sensitive data. I can see no reason why details of a company's litigation (which may include details of counter-parties and claims) need be published to the extent often required in corporation tax returns and support papers, or a detailed analysis of its capital spending, and a break down of many other items. There is no more reason for this to be in the public domain to understand its tax than for detail of its payroll to be published to understand its accounts. I am no fan of secrecy, and I want vastly improved transparency from companies, but there have to be boundaries and corporate tax returns and computations can include data impacting many other parties as well, some of whose privacy (to which individuals have much stronger entitlement than companies) would be compromised in the process. I think therefore this is a step too far.
But it's also an unnecessary one. The purpose of all reporting is to understand risk: it is not to know every blow by blow detail of what a company does or to to be able to check HMRC's workings. We simply do not need this data to hold a company to account if we have the data I note above: in most case that would give us the vast majority of what we need and if parliament needed more it could ask, in camera. But I think that far enough. A sense of proprtion is required here, and any demand has to recognise compromises of cost and risk to the privacy of others in relation to utility. That weighs against publishing corporate tax returns in my view.
I suggest focus should be on what we really need. There's ample to do there already. Let's get public country-by-country reporting first.