Transparency key in tax scandal fight
IT WAS just over a year ago, in September 2016, when an amendment to the Finance Bill gave the Government the power to require multi-nationals to publish tax information in all countries in which they operate, known as public country-bycountry reporting.
This is an important measure – not the only measure – on how we tackle some of the scandals that have emerged through the Panama papers and, more recently, the Paradise papers.
Openness on this issue means that we can see where large companies pay their tax and discourage tax avoidance, which will help us all.
In the extractive and finance sectors, a form of public country-by-country reporting is already in place. Increasingly, investors want to see more of that. Why is that so?
They are getting more and more worried by these public disclosures and by the reputational damage to them of putting money into good enterprises which, however, at the end of the day compromise their investment and their sense of the ethics behind the contribution they want to make towards creating wealth.
We all want to create wealth, because that creates the opportunities to tax and provide for public services.
It is clear from the Panama papers, and now the Paradise papers, that companies with a mandate to deliver a return to shareholders and investors seem to be under huge pressure to find ways to cut their tax bills, despite the large profits they make.
That is why governments have a duty to ensure that their domestic tax laws are as watertight as possible. Importantly, we need to make sure that we provide even greater transparency.
We know, and we have always known, that big companies and very wealthy individuals can easily move their revenue around the world, out of the reach of Governments, and find whatever loophole they can to become richer.
Corporate tax avoidance is not only unfair but damaging to economies and societies.
At home and overseas, it means less money for stretched public services. It is estimated that developing countries lose at least $100bn every year. That would be enough to educate 12 million children, who are currently missing schooling, and to provide healthcare that could save the lives of six million children.
Paying tax responsibly is an issue of right and wrong.
If those with accountants and lawyers seek to avoid paying tax, preferring instead a world of hidden havens and shell companies, trust breaks down and in the end we all lose out.
Last year, David Gauke, the then Treasury Minister, now the Secretary of State for Work and Pensions, said that although the Government were keen on a multilateral deal on public country-bycountry reporting, if we did not make progress in a year, we would have to revisit the issue.
In fact, in answer to a question to the Prime Minister on this very subject, she admitted that little progress had been made. One year on, the EU proposal, which is flawed, has stalled.
The time has now come for the Government to have the courage of their convictions to introduce public reporting requirements and then seek to build a coalition of the willing. Transparency is one sure way to rebuild trust. I hope that the Ministers will consider this and meet a cross-party delegation to discuss it further.