THE BLOG

One Year On - Still Waiting For Tax

07/07/2017 11:42

They say that a week is a long time in politics. But recently it feels like a day is enough to change almost anything. And if it is true that a political week is a long time, then right now a year feels like a very very long time indeed.

This time last year, David Cameron was still Prime Minister, Boris was the favourite for Tory party leader, and Jeremy Corbyn was facing mass resignations from his Shadow Ministerial team.

Closer to my areas of work, MPs were debating whether to require UK companies to publish their tax payments around the world. NGOs like Christian Aid were really hoping to finally make some progress on tax transparency.

A quick potted history: In January 2016, Google agreed a £130 million tax deal with HMRC. This covered money Google had owed since 2005, and followed a six-year inquiry. The Chancellor George Osborne hailed the deal as a 'major success', but widespread criticism piled pressure on him to do much more to stop multinational companies from dodging taxes in the UK.

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In response, the Chancellor jumped on a policy that organisations like Christian Aid, Oxfam, ActionAid and many others have campaigned on for some time. Osborne said he was now in favour of UK companies being required to publish reports on their business activity alongside the taxes that they pay in each country where they work - a policy known as 'Public Country by Country Reporting'. This is really important for people in developing countries where governments are estimated to be losing around $200 billion a year due to tax avoidance by multinational companies. People in poor countries see companies working in their country, but too often do not see any benefits of increased investment in their public services. It is time for transparency. People in developing countries deserve to see both how much business companies are doing in their country, and crucially, also see how much tax they are paying.

This is the only way to restore trust in big businesses.

A similar debate was also raging within the UK last year. MPs on the influential Public Accounts Committee including Caroline Flint and Anne-Marie Trevelyan wanted to examine HMRC's deal with Google. But without transparency it was impossible for them to see the nuts and bolts, or to know whether the deal was a reasonable one or not. With influential MPs, charities and the UK Government all seemingly in favour of public country-by-country reporting, surely it would happen soon?
Sadly, it is not always as easy as that.

While the UK Government does say it wants more transparency, it also says that it doesn't want to go it alone. Instead it wants to team up with other countries to introduce it together. While this is a reasonable position, it is now nearly 18 months since we committed to transparency on our own shores, and it is very difficult to know quite what progress has been achieved on a multilateral deal. Negotiations in the EU are currently stalled.

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The EU Parliament wants to introduce massive loopholes for companies to not report data if they claim it is 'commercially confidential', and the EU Commission only wants reporting of data within the EU, which would render the whole thing largely pointless, especially for developing countries. And of course, the UK is scheduled to Brexit in March 2019, so even if a deal was struck by then, we may well not be subject to it after leaving the EU.

How hard is the UK Government working to get a multilateral deal? It is very difficult to know, because in responses to questions from MPs, Ministers have been extremely vague about what meetings they are having on this issue, who they are working with, and how the potential deal - if there is a deal - is shaping up.

The other option for the government is to go it alone to ensure transparency from UK companies without the loopholes of the current proposals in the EU. This would allow the UK to get ahead of the game and set the standard. This would be a fantastic demonstration that we have no intention of the UK becoming a tax haven post-Brexit. The UK Government has introduced many other tax changes unilaterally - so why not this one?

But is there a timeline to consider acting alone, given the problems with EU proposals? Fortunately, in response to that very question almost exactly one year ago, the then Chief Secretary to the Treasury David Gauke MP said:
"If we have not made progress by this time next year on reaching a multilateral agreement, we will need to look carefully at the issue once again."

Mr Gauke has now left the Treasury, but we have two new Ministers - Liz Truss as Chief Secretary and Mel Stride as Financial Secretary (responsible for tax). To them I say this - it has been a year. The EU negotiations are producing all kinds of loopholes. By the time a deal is done we may not even be subject to it anyway. Please continue to work to get rid of the loopholes in the EU deal, but please now go further. Let the UK take the lead. Look again at acting alone to introduce proper transparency on UK shores. Given that the UK is responsible for a good proportion of the world's off-shore tax havens already, and was instrumental in building the tax haven system, it is only right that we take the lead on tackling tax dodging at home.

It is time to end the secrecy around how the figure of £130 million was negotiated in Google's tax bill. And to end the scandalous amount that developing countries lose to tax avoidance every year - which is far more than they receive in foreign aid. It is time to introduce proper transparency for corporate tax payments from UK companies, not just in the UK, but from every country that they work in the world.

Recent polling published by ActionAid shows that 84% of UK adults want the UK Government to take action to ensure UK companies do not avoid paying taxes in developing countries where they operate, and 83% want British companies to publish how much tax they pay in every country where they do business. There is no uncertainty on public opinion on this.

The time has come for action from the government to join us in our thinking - please join me in calling for it.

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