Taxation: International Companies

Debate between Lord Sassoon and Lord Bishop of Oxford

Tuesday 23rd October 2012 Lords Chamber

[Lord Harries of Pentregarth]

To ask Her Majesty’s Government what steps they are taking to ensure that international companies pay a fair proportion of United Kingdom tax.

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, the vast majority of taxpayers pay the right tax at the right time. However, the Government are alert to the risk that some companies may try to structure their tax affairs so that profits from UK-based economic activity are not taxed here. The UK has specific tax rules to combat tax avoidance by international companies and fully supports the Organisation for Economic Co-operation and Development initiative on base erosion and profit shifting, which has been endorsed by the G20.

[Lord Harries of Pentregarth]

My Lords, I am very glad to hear that the Government are alert to the situation of international companies, but would the Minister agree that, when they are being assessed for tax purposes, they should be required to reveal every country in which they are operating and the tax they pay in each country, with full financial details of their own company and link-companies? In addition to insisting on this for UK purposes, would the Government be prepared to work for an international agreement so that all transnational companies were required to give a fully transparent country-by-country report for any country in which they operated?

[Lord Sassoon]

My Lords, I certainly agree with the underlying premise behind the noble and right reverend Lord’s question, which is that there is still a lot more work to be done in this area. The international tax architecture was developed in an age of fixed factories and plant and machinery, with much less interconnectedness. Now we live in a connected, corporate world in which internet commerce and so on make it much more complex. That is why the OECD is again looking fundamentally at whether countries have the right weapons, whether it is tax treaties, under which the exchange of information would come; transfer pricing; aggressive tax planning; or harmful tax practices. I certainly agree that tax information is important to that but, as far as the authorities are concerned, that really comes under the tax treaties and the work that the OECD will be looking at.