Government should ‘step up efforts to make tax more transparent’

8 Nov 17

The government should step up its efforts to tackle tax dodging by implementing transparency measures in the upcoming Budget, the head of advocacy at Oxfam told an event on responsible tax.

The UK needs to “get ahead of the next scandal” and treat tax avoidance as a serious public policy issue, Katy Chakrabortty told the all-party parliamentary group on responsible tax on Monday. 

“It’s not the case the UK cannot do something on its own,” she explained to the politicians, business leaders and NGOs gathered to discuss how a responsible tax system would help end tax avoidance and “be fair to everybody”.

She called on the chancellor to use the Budget to implement tougher tax laws for multinationals, including those operating in developing countries, by the end of 2019.

European measures on tax transparency have stalled, but the UK should build on the leadership it has already shown by introducing public country-by-country reporting for UK companies, Chakrabortty said.

Margaret Hodge, chair of the APPG on responsible tax, said at the same event: “Our aim and objective is to try to build a consensus around how we can move forward into creating a responsible tax system that seems to be fair to everybody.”

The event took place just a day after the leak of the Paradise Papers revealed wide-scale international investments made in offshore ‘tax havens’.

Oxfam released a briefing paper yesterday, called Ending the Tax Scandals, which also called on the government to ensure that oversees territories introduce public registers, developing countries can access tax and company data, UK corporate tax rules do not incentivise companies to avoid tax abroad, and to show international leadership on tackling tax avoidance.

Group tax director, of Lloyds Banking Group, Saibh Young and Jeannette Andrews, corporate governance manager at Legal and General Investment Management, were also on the panel and spoke about how they ensure their tax is ‘responsible’.

A third of the £78bn tax that companies dodge in poor countries annually is enough to cover the bill for essential healthcare, according to Oxfam.

Greater tax transparency would help verify companies’ tax bills and their real economic activity in every country where they do business, the charity has said. 

By making this information public, it would help tip the power balance between multinationals and those who need the money the most, Chakrabortty said, as tax dodging is taking away resources that could be used for basic services in developing countries.

She said: “Transparency isn’t easy and it can create a rocky ride at first.”

But it is “by far the best strategy in the long-term”, she added.

Country-by-country reporting, under the Organisation for Economic Co-operation and Development’s (OECD) base erosion and profit shifting (BEPS) initiative, provides a template for multinationals to report annually and for each tax jurisdiction in which they do business.

It provides the HMRC with information about businesses global activities, profits and taxes.

BEPS refers to tax avoidance strategies that exploit gaps and mismatches tax rules to shift profits to low or no-tax locations. More than 100 countries and jurisdictions are collaborating to implement the BEPS measures, including country-by-country reporting.

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