In January 2003 I created the idea of public country-by-country reporting. Today it became an European Union legal requirement and the resulting law is, despite the passage of time and obvious changes in thinking in between, quite remarkably like the original suggestion.
Of course there are flaws. The EU is, bizarrely, not requiring that intra-group trading be shown separately from third party trading in public country-by-country reporting even though this data will have to be available to all the companies involved because it is now required for tax purposes and despite the fact that it is in intra-group trading that so much of the tax risk in multinational corporations is to be found.
And, unfortunately, the Conservatives and Liberals in the EU parliament fought a rearguard action to try to protect big business from accountability by permitting them to apply for a derogation from disclosure of 'commercially sensitive information' for a limited period after the requirement becomes law. We'll have to rely on the EU not to allow this too often, but any loophole worries me: I am well aware that business will be be queuing up to take advantage of it. The whole proposal would have been vastly improved without either of these weaknesses having been built in.
That said, I cannot help but celebrate this advance for public country-by-country reporting. It puts me in the perhaps unique position of being perhaps the only person on the planet who thought of a whole new way of reporting for multinational corporations and who has seen it enacted* by 27 nation states (at least). I might have a cup of tea to celebrate. And when doing so I'll offer my thanks to the thousands, from the Tax Justice Network through so many development NGOs, who have fought tirelessly for this over so long.
* NB: I note some are saying I am being premature as objection in Council could still be received. I thought this had been neutered now, but maybe I am wrong
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Well done!!
Many congratulations Richard
Well done!
A real achievement. A private citizen can make a difference. Congratulations.
If you have any enthusiasm left for corporate tax reform after your success here Richard, have you seen the OTS report on the simplification of corporation tax computation?
https://www.gov.uk/government/news/the-ots-points-the-way-to-simplify-corporation-tax
The main thrust seems to be aligning computations with company accounts – so the format of these accounts, if these changes are enacted, will greatly influence tax revenues.
I can feel the avoidance cogs kick into gear.
I will try to cover it
Already four blog ideas for the morning though
My heart sinks…
Congratulations Richard well done.
Richard, you’ve done…and are continuing to do many wonderful things.
All the best,
Jeff
Thanks Jeff
Appreciated
Hi Richard,
that is great work!
An initial thought I have because I used to be an auditor for KPMG and audited European multi-nationals of different fields of business for several years.
I habe been always wondering why it is not requested that in the audit report there is no confirmation about the fact that there was no material profit shifting carried out during the reporting year. Even today I am convinced that the big fours should confirm or have to be force to confirm that there is no material profit shifting going on because it would be possible to make them liable for a false statement. Secondly, the big four know what materiality means! Thirdly, it is crystal clear to me that it is extremely hard and even impossible for tax authorities to understand complex accounting methods such as replacement value theory, inflation accounting. Therefore, I am convinced that it takes years for supervisors, tax authorities to really understand what is going on, however, if auditors (big fours) can be made liable by such a confirmation it also would be very efficient for the global business as well. Partners of the Big Fours know preciously what is going on in a multi-national when signing the audit report.
I wonder what you think about it.
Best,
Ruedi
All good points Ruedi
What worries me is that tax is moving more and more onto an accounting basis: the opacity of the tax base will onoly grow as a result and the opprtunity for abuse with it
This is why CBCR is so important: it cut through the accounting nonsense to the economic substance of the issue and exposes who is playing games
Richard,
I agree CBCR is Nr 1 in the list. My points are good to lock the Big Four is because I do not trust them, sorry even though I am a CPA as well.
You are right the key issue is “the creative accounting” which eventually leaves the Big Fours again a lot of space to argue, to interpret and paraphrase to the Big Fours liking. Accounting is still an art and not a science!
Best,
Ruedi
!
Richard
You have achieved a three-pronged victory
1. You have achieved Public country-by-country reporting
2. You have converted what was initially just a private idea into an international reality
3. You have shown that in a democracy the word of just one ordinary person without any special wealth or status CAN be heard
We salute you!
I think the last most significant
It is simply not true that the EU does not listen