The history of country-by-country reporting is pretty much like that of any new idea seeking to change public policy. First, they ignore you. Then they laugh at you. Then they fight you. Then you win.
Yesterday saw the launch of the GRI standard on tax, which is very largely about country-by-country reporting. It is the first every public country-by-country reporting standard. And as was acknowledged, it's weakness is that it is not mandatory. So there are still wins to be had.
That said, I can't help but say it was a slightly emotional afternoon for me. Waqas Samad, Group Director of Information Services Division and CEO of FTSE Russell for the London Stock Exchange Group said things like:
Fewer than half of companies currently commit to tax transparency
There is no standard to guide them
That is why the London Stock Exchange commends the standard
It creates a more resilient and sustainable standard for reporting.
And Tim Mohin of the GRI said:
This is a momentous day for GRI .
This is the first global country-by-country reporting standard.
And he made the point that this is about more than tax:
What has this to do with sustainability?
This is fundamental to our sustainable future.
Beating abuse assists delivery of the Sustainable Development Goals.
The take of Wilhelm Mohn of Norges Bank Investment Management, who manage the Norwegian pension fund based on its oil wealth, said:
Aggressive tax behaviour is not obviously in our interests.
And he made the point that this standard helps beat it.
Whilst Elise Bean, former Chief Counsel to the U.S. Senate Permanent Subcommittee on Investigations made the point that this was truly stakeholder accounting, which is a recurring theme of mine (and she does read this blog, as she told me, and we have known each other for some time). Her six stakeholder groups are slightly different from mine:
- Tax authorities
- Regulators
- Policy makers
- Investors
- Academics
- The public
I think that appropriate in the context of CBCR. She omitted employees and trading partners and added policymakers and academics. I am happy with that.
This day has been a long time coming. I admit it was good to hear the praises sung of something which the accounting profession attacked and said was impossible for so long. If I single out praise on the day it was for Andy Cole from Vodaphone, which is a company that has walked the talk on this one, and has said it has only won by doing so.
But there remains a question, and I asked it. Why is it that the accounting professions' accounting standard setters (the International Accounting Standards Board, for example) still deny that this issue is of any relevance when that is glaringly obviously not true?
We have won a battle. The war is still not won.
But it was still a good day. And I admit I enjoyed it.
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A very long time in coming, especially for you Richard. I think congratulations are in order.
I have been reading how the French Senate passed a Bill last year where tech companies with more than €750 million in global revenue and €25 million in French revenue will be required to pay a 3 percent tax on total annual revenue generated by providing services to French users, the tax will be levied in France. I believe it has causes Trump to threaten tariffs against French goods.
Although it has the appearance of elements of country by country reporting to me, I have been wondering if you might have any helpful thoughts on it?
Thanks
I admit I do not see much about country-by-country reporting in this
This is national based tax. But the key issue will be getting reliable data to charge it on
Will the tech companies cooperate? A very good question. The OED rules will not help and the GRI standard is voluntary
We have some way to go as yet
Elise Bean, is she a “friend” of yours?
We know each other
I am not saying she’s a friend
Rat Scabies is a good pseudonym. I think that I might shamelessly copy you and appear as “Captain Sensible” in forums that require an anonymous screen name.
As far as I can tell the accountancy profession as a a whole doesn’t lead, it follows, which may be partly due to the fact that it doesn’t hire firms as much as it gets hired by them (?). I don’t know. It seems that way (He who pays the piper…?).
Then again, given that a CbC frame work is established across 70 nations
https://www.oecd.org/tax/automatic-exchange/about-automatic-exchange/CbC-MCAA-Signatories.pdf
https://www.oecd.org/tax/automatic-exchange/about-automatic-exchange/cbc-mcaa.pdf
https://mnetax.com/oecd-releases-more-guidance-on-implementing-country-by-country-reporting-standards-36472
its hard to see how the IASB can continue to hold out but they seem determined to do so. On the basis of curiosity I tried to do a bit of quick research on this and came full circle to here (lol):
https://www.accountingweb.co.uk/community/blogs/richardmurphy/richard-murphy-why-we-need-an-ifrs-for-tax
Elsewhere it seemed that CbC was one thing and IFRS another, co-existing as separate entities. The remaining disconnect between them is, as you suggest, quite conspicuous.
As an ignorant outsider my instinct on this, judging from the vaguely connected bits of evidence I can find, is that the IASB et al. are going to quietly hold out on this for as long as they feasibly can and when they eventually follow, they will follow the lead of governments (at a point where they consider resistance to be more difficult than adaptation). To that end the key may reside with the increasingly progressive US Democrats (and the G20).
If the US and EU develop some sort of meaningfully uniform positions on CbC, more advanced than the positions that they currently hold, then the rest of the G20 look likely to follow suit and at some point thereafter the accounting standard setters will fall into line but only because their current position of denial will be too difficult to maintain.
And your time timescale?
That’s a really good question. This specific issue of CbC (BEPS, transfer pricing etc.) provides a really interesting insight into the way that global institutions operate. CbC is, as a tool and concept at least, undoubtedly well established at the institutional level but it has got here over time in such a slow, vague, drip-feed way.
The story of it as it odds with the way that many of us would assume that institutions operate – clearly and decisively (clearly not it would appear). Anyhow as to the timescale. For an EU/US led G20 initiative that solidifies CbC, maybe 5 to 10 years, possibly less. Interestingly, Brexit might hasten that process on the EU side given that the UK (the City) was always a drag on EU progress. The fallout from the next financial crisis might hasten progress as well.
As to the IASB et al. I honestly don’t know enough about them to comment or even hazard a guess.
We’ve also got to remember that MNCs who are the major clients of the big accounting firms are the targets of CbC not the proponents of it. The big accountancy outfits are themselves MNCs. So they’ll be the last to get on board.
I don’t know but I imagine that they would have a decisive influence on the IASB. I’m not knowledgable about this, I’m just looking at the inherent motives involved.
Which is why we need accounting back under direct government control
Can I just add my congratulations Richard. Sounds like a watershed weekend. Enjoy it. As an aside, I just bought your book and am really enjoying it.
Thanks