Ernst & Young's head of tax policy in the UK has claimed that country-by-country reporting may be of little or no benefit in tackling international tax evasion. Writing in the Tax Journal, Chris Sanger said the debate would continue but "it is unclear that [country-by-country reporting] would in practice bring much, if any, benefit, as the information is already readily available to each of the tax authorities and we are now seeing much greater cooperation between them". The reform "may merely result in the production of information that is arguably meaningless without detailed context and yet still costly to produce," he suggested.
The UK government has said it is discussing with international partners whether reform could offer an effective way of improving tax transparency. Campaigners have argued that international accounting standards allow multinational groups to declare one figure in respect of worldwide profits. Christian Aid said: "There is nothing that says they must report how much money they make – and taxes they pay – in every country in which they operate. This opens the way for all manner of tax dodging, legal and not so legal."
Sanger asserted that the Oxford University Centre for Business Taxation's recent report for the Department for International Development "disputed" one of the "assumptions" behind interest in the issue of tax evasion, namely that there is a large "tax gap" driven by evasion.
That report's authors concluded that "most existing estimates of tax revenue losses in developing countries due to evasion and avoidance are not based on reliable methods and data". But they also recommended further research to improve understanding of the implications of avoidance and evasion for developing countries.
I'll have more on country-by-country reporting soon.
Sanger also criticised proposals for a voluntary code of practice for banks, claiming that, in contrast to certainty provided by legislation, " a subset of taxpayers are being asked to constrain their behaviours to those that HMRC, as tax authority, believes would be the view of MPs". The code would require a bank to undertake not to promote arrangements that "would give a result contrary to the intentions of parliament".
The current issue of Tolley's Practical Tax newsletter (31 July) has more on the bank code and other developments including:
- Amanda Sullivan reports on the July 2009 meeting of the Joint Forum on Expatriate Tax and NICs
- Government targets 'false self-employment' in construction industry
- HMRC responds to consultation on 'Your Charter'
