The UK Parliament unanimously approved country-by-country (CbC) reporting of taxes paid by multinational corporations.
The move gives the UK Treasury the power to require multinational groups to publish, as part of their tax strategy disclosures, a CbC report showing their profits, taxes paid and other financial information for the countries in which they operate. Other countries are sure to take note of the UK vote, and concerns may arise among corporations that public disclosure of CbC reports might spread.
CbC reporting was an amendment to the omnibus Finance Bill 2016, introduced by Labour Member of Parliament Caroline Flint. She said she was “grateful for the chance once again to put the case that large multinationals should cooperate with public country-by-country reporting in the UK so that we can all gain greater insight into the trading activities that determine the amount of corporation tax being paid.”
A number of countries, including China, France, Germany, India, Australia, Canada, Japan, Italy and the UK have signed a multilateral agreement that is expected to facilitate the exchange of CbC reports between tax authorities in different jurisdictions. The United States is not a signatory.
The Organisation for Economic Co-operation and Development (OECD) has proposed the introduction of CbC reporting as part of a package of recommendations to address tax avoidance by multinationals. The reports are designed to help paint a global picture of how multinationals operate so that revenue authorities can better assess transfer pricing risks. Public release of CbC reports isn’t mandatory; it’s up to individual countries to decide on this.
Public pressure expected
The amendment itself doesn’t require public disclosure of CbC reports, but it allows the Treasury to issue regulations for the requirement. However, it is uncertain that the UK Treasury will issue the required regulations because of the confidentiality issues involved and because the United States has said it won’t exchange CbC reports with countries that make them public.