On November 20, 2018, the U.K. Financial Secretary to HM Treasury, Mel Stride, answered a written question by a Member of Parliament (MP), Caroline Flint, about U.K. efforts to advocate for public country-by-country (CbC) reporting requirements as follows:
“The [UK] Government believes a multilateral approach to public country-by-country reporting would help ensure effective implementation. The UK has raised public country-by-country reporting with international partners where appropriate and the Government has engaged with our international partners, including at EU level, on this issue.”
Under Article 4 of the BEPS Action 13 final report, a CbC Report is defined as:
- Aggregate information relating to the amount of revenue, profit (loss) before income tax, income tax paid, income tax accrued, stated capital, accumulated earnings, number of employees, and tangible assets other than cash or cash equivalents, with regard to each jurisdiction in which an MNE Group operates.
- Identification of each Constituent Entity of the MNE Group, providing its jurisdiction of tax residence and, when different, the jurisdiction under which it is organized, and the nature of its main business activities.
Article 6 of the Action 13 final report addresses the use and confidentiality of the information in the CbC report. Among other provisions, transfer pricing adjustments by a country’s tax administration will not be based on the CbC report and the confidentiality of the information must be preserved to the same extent as if the information were provided under the OECD Multilateral Convention on Mutual Administrative Assistance in Tax Matters.
On June 13, 2016, MP Flint issued a press release concerning proposed amendments that the U.K. Labour Party added to Finance (No. 2) Bill 2016 (Bill) for public CbC reporting. The amendments were published on June 8, 2016.
The proposed amendments echoed previous statements by the U.K. Chancellor of the Exchequer (George Osborne) on February 12, 2016 that the EU needs to push for public disclosure of CbC report information.
On June 28, 2016, the U.K. House of Commons defeated the public CbC reporting amendments proposed by MP Flint by a vote of 295 to 273.
However, on September 5, 2016, U.K. MPs approved, without division, Amendment 145 to the Bill relating to CbC reporting of taxes paid by multinationals.
On September 15, 2016, Finance Act 2016 received Royal Assent. Schedule 19 (Part II) of the legislation gives HM Treasury the power to require 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. It should be noted that the amendment itself does not require public disclosure of CbC reports, but it would allow HM Treasury to issue regulations for the requirement.
On November 5, 2017, the International Consortium of Investigative Journalists (ICIJ) released details of its global investigation into offshore tax activities stemming from 13.4 million leaked files (i.e., “Paradise Papers”). The Paradise Papers revealed details of tax planning by nearly 100 multinational corporations, as well as the offshore interests and activities of more than 120 politicians and world leaders.
On November 14, 2017, the U.K. House of Commons held an emergency debate on tax avoidance and evasion ahead of Chancellor Philip Hammond’s finalization of the 2018 Budget. During the debate, members emphasized the need for public CbC reporting following the release of the Paradise Papers.
According to HMRC’s 2018 single departmental plan, the U.K. will review its international tax rules and consider making CbC reports public.
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