New UK law allows government to introduce public country-by-country reporting by multinationals

by Tim Law

Yesterday saw the latest stage in the parliamentary debates on the UK Finance Bill 2016, which brings in tax legislative changes.

One of the amendments proposed by a cross-party group of MPs was to insert a clause allowing the government to bring in a requirement for public country-by-country reporting by multinational corporations. The amendment gained government support, and was passed. This will become law when it receives Royal Assent later this year.

The amendment was “enabling legislation.” It puts in place a mechanism under which the UK may introduce public CBCR through tax regulations. There is no obligation to do so, and certainly no timescale set.

The action is seen by most as another significant stepping stone toward greater transparency, being part of a Finance Bill that already includes a new requirement for businesses with large UK operations to publish a UK Tax Strategy.

However, that said, what must be made clear is that it is not likely that the UK will be introducing public CBCR anytime soon. It was actually a good piece of politics.

The UK government is under pressure from the public, media, and NGOs to increase transparency over the tax affairs of multinationals. On the other hand, there are pressures from other jurisdictions, not least of which being the US, to hold back from public transparency.

Both the EU Commission and members of the European Parliament have also pushed for public CBCR, and the UK government expressed support for this in principle earlier this year. However, the UK is looking for a multilateral approach and has not shown intent to adopt this unilaterally.

There is still a way to go before there is international support for public CBCR, which the government wants to see before pushing the button. That is, unless we see a change in policy.

In the meantime, businesses need to start taking some action. The UK government didn’t only support the amendment because it was just an enabling one. They said “we fully support the intentions” of the amendment.

Businesses with a UK presence need to start thinking about what that means for them.