The Chartered Institute of Taxation (CIOT) has said that allowing the public to see the country by country reporting records of companies operating in the EU is not enough to counter growing global scepticism about the fairness of the tax system.
The EU proposes that firms with more than €750 million in sales disclose how much tax they pay in which EU countries as well as any activities in specific offshore financial centres. This will have to be adopted with a qualified majority vote in the European Council.
Glyn Fullelove, Chair of CIOT’s International Taxes Sub-committee, said:
“More public transparency is worthwhile if it increases public trust in the international tax system. But if we are to have public country-by-country reporting then it would be best to have it on a global basis, otherwise this EU measure, while significant, risks only partially answering the public’s questions about the international tax system.
“Also, data is only useful if it is seen in the right context. What would now be good to see from governments is more explanation to their citizens of how the tax system actually works, so the public can makes up its mind with all the facts, such as that corporation tax is paid on profits and not sales and it is legitimate for a subsidiary to pay for the use of intellectual property owned by another group company.
“Companies will need to be prepared to explain more about where the value arises in their business and how value can get sometimes concentrated in relatively small slices of their operations rather than in the parts that employ the most people.”