Tuesday, 23 June 2009

Forcing multi-nationals to reveal how much tax they pay in each jurisdiction

This seems like a worthwhile initiative from HMRC as outlined in this piece in the Guardian.

The OECD, the thinktank of leading nations which sets international tax standards, is to take forward measures forcing multinational companies to reveal precisely how much tax they pay in each jurisdiction they operate in.

The move comes after Treasury minister, Stephen Timms yesterday urged 20 of the world's most powerful nations to adopt the accounting standard known as country-by-country reporting which development charities believe would see a huge surge of tax revenues to the world's poorest countries.

Timms, who was attending a meeting of G20 financial ministers to establish progress made on tax transparency since the London Summit, said the idea received strong support from a number of countries including Norway, Sweden, Belgium and Korea.

The OECD will next week discuss initiating a feasibility study into Timms' plan. Speaking to The Guardian, Timms said: "We need the OECD to explore the ins and outs of this."

The move is being hailed as a significant breakthrough towards ending tax secrecy. Tax officials in poor countries are unable to establish precise information on corporate profits and revenues because they lack manpower. But it is estimated that developing countries miss out on £97bn in lost revenue mainly from mining firms reducing the amount of profits they make through intra-group trading otherwise known as transfer pricing techniques.

Finance ministers also discussed speeding up the implementation of tax transparency and possible economic sanctions against countries which do not comply.

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