Public Country-by-country Reporting

Anne Main Excerpts

Wednesday 22nd November 2017 Westminster Hall

[Caroline Flint (Don Valley) (Lab)]

I am delighted to serve under your chairmanship, Mrs Main. I thank the hon. Member for Amber Valley (Nigel Mills), my colleague and friend, for securing and introducing this debate. I will focus on the case that investors are now making for public country-by-country reporting; an interesting development is that more and more investors are concerned about the behaviour of the companies they invest in, including whether they are paying their fair share of tax on their economic activity around the world.

Principles for Responsible Investment is a United Nations-backed organisation with more than 1,860 signatories —asset owners, investment managers and service providers. It is trying to develop a dialogue with firms about responsible tax strategies. Its website defines its mission as follows:

“Responsible investment is an approach to investing that aims to incorporate environmental, social and governance (ESG) factors into investment decisions, to better manage risk and generate sustainable, long-term returns.”

Its guidance for dialogue with firms includes the following observation:

“An aggressive corporate approach to tax planning should be a concern to investors as it can create earnings risk and lead to governance problems; damage reputation and brand value; cause macroeconomic and societal distortions.”

Under the subheading “Why now?”, it further observes:

“Stronger enforcement around the world and increased media and civil society scrutiny have made multinational companies much more vulnerable to unexpected tax assessments and increases in tax liability and reputational damage.”

In a section headed “Transparency on tax strategies, tax-related risks and country-by-country activities”, PRI’s working group on tax disclosure makes the following recommendation:

“Detailed reporting would provide an overview of…country-by-country reporting details, including a list of all subsidiaries and their business nature…as required by the appropriate OECD-BEPS templates”.

That would be helpful. The welcome dialogue encouraged by PRI is a sign that awareness of the implications of aggressive tax avoidance is growing and that investors want to know more about company tax strategies.

Last night, I was at a dinner organised by Fair Tax Mark and SSE to discuss approaches to tax transparency with other companies, including investment organisations. It was interesting to hear from a number of firms that increased openness about how much tax they pay and why has become an important part of boards’ discussions and has benefited how boards approach the issues. A number of representatives also pointed out how positively their own workforce had responded to increased openness, because it made them feel good about what their employers were doing—not only creating jobs, but putting something back for the wider good of the communities where they work and create wealth.

As MPs, we often receive information from companies in our constituencies and elsewhere about how much they contribute to the public good in the United Kingdom. They should be praised not only for the jobs and wealth they create, but for what they put back into communities. Firms put money into the environment, encourage their employees to be volunteers, and make efforts in many important areas; a number of children’s football teams local to me have benefited from football strips funded by corporate concerns. However, what I want to hear more than anything else from companies in my constituency and multinational companies in London or our big cities is how transparent they are about the tax they pay. That needs to be the headline, because any doubt that they are paying their fair share of tax undermines all their good work for the public and the community.

I believe the world is moving towards greater transparency. I would be interested to hear the Minister explain, when he replies to this debate, why companies in the extractive and financial sectors already have to put this information into the public domain and why they do not see that as a risk in terms of competition. They have accepted that it is something they have to do. Why is it okay for the companies in those sectors to provide this information, but somehow there is a barrier to other companies in other sectors joining forces and providing this information?

When the Minister sums up, I would love to know what level of multilateral co-operation is necessary. How many other countries does it take to form a critical mass and enable the UK to move forward? Should this be through the EU or through the UN? It would be really interesting to know what threshold we are working towards to bring into being the enabling power already contained in the Finance Act 2016—because the Government adopted my amendment, which was a cross-party amendment—to introduce country-by-country reporting.

I really believe that the world is moving towards greater transparency, and the Government have a choice, as my friend the hon. Member for Amber Valley said. Is the UK going to be a leader or will we just follow the pack?

[Mrs Anne Main (in the Chair)]

Before I call the next hon. Member, let me say that there are three Members who wish to speak, and I will begin calling the Front Benchers at 5.10 pm.

--- Later in debate ---

[Dame Margaret Hodge]

The Minister is nodding his head, but the Government should be honest with us. The figure of £160 billion that is currently used—I have heard it used time and time again—is simply an HMRC estimate of the money due from tax avoidance that it has uncovered. It does not tell us how much has been collected or how much has been added to the coffers.

Since the Minister used the figure in a debate last week, I have tried to identify how much we have actually got in. I have asked everybody. I have asked the National Audit Office and the Library. I have tabled questions to the Minister, to which he has yet to reply—perhaps he will reply this afternoon. No one actually tells one how much has been collected in tax avoidance. My guess is that it is a tiny, minute amount of that £160 billion that the Government claim they have got in. Please be honest with us. A little bit of honesty will enable us to have a proper debate.

The final point I want to make, adding to what others have said, is that if the Minister showed the bold leadership we want him to show by having public registers of beneficial ownership, he would be incredibly popular. I would have thought that there could not be a better time than now for Conservative Members to try to gain some popularity. I will give three examples of what has happened recently. After the release of the Paradise papers, the Tax Justice Network launched a petition that gained more than 200,000 signatures. It has now presented that petition to Downing Street. Oxfam did some polling that showed that eight out of 10 members of the public think that multinationals with UK headquarters should publish information publicly about the size of their profits, where they are made, what taxes are paid and the countries in which they operate. Some 70% of Conservative voters believe that the Government should be more active in tackling tax avoidance by companies. Some 80% of Conservative voters are in favour of tougher transparency rules for companies.

The final survey I wanted to refer to was of the FTSE 100. Four out of every five of the top 100 FTSE companies would not oppose the introduction of a legal requirement to make their country-by-country reports public. In fact, a large number would support it. The hon. Member for Amber Valley eloquently made the point that the reporting requirements in other legislation to date are pretty open. Why not put this requirement into the mix? It is supported by the analysis.

This is the fourth debate on these issues in the past month that I have participated in, and I will carry on holding such debates time and time again. I am sorry if the Minister feels it is not the best use of his time, but we will carry on doing this. This is a campaign we are absolutely determined to win, and part of that campaign is public country-by-country reporting.

[Mrs Anne Main (in the Chair)]

I remind Members that I will call the Front-Bench spokesman for the Scottish National party at 5.10 pm.

--- Later in debate ---

[Anneliese Dodds (Oxford East) (Lab/Co-op)]

Thank you, Mrs Main, for your stewardship of this debate. I welcome the debate, and congratulate the hon. Member for Amber Valley (Nigel Mills) on securing it, and thank him for his considerable work promoting tax transparency, building on his experience professionally before entering this place. Of course, I also want to hail the work of others in promoting public country-by-country reporting, not least that of my right hon. Friend the Member for Don Valley (Caroline Flint), who has strenuously promoted it many times, and that of my right hon. Friend the Member for Barking (Dame Margaret Hodge), who has ensured that this matter has been promoted consistently by the all-party parliamentary group on responsible tax and many others. I also commend my hon. Friend the Member for Ealing Central and Acton (Dr Huq), who importantly drew our attention to the fact that this is about not only tax transparency, but trying to deal with corruption and money laundering.

I will try to keep my remarks succinct, but I want to first say how pleased I am that we are having this debate, because of the huge amount of public concern around tax matters, as highlighted by other hon. Members. My right hon. Friend the Member for Barking has already referred to public opinion polling that shows that there is enormous support for more transparency around taxation matters, particularly for multinational enterprises. That is particularly important, because public country-by-country reporting enables us to focus on profit-shifting activities. Often when we talk about aggressive tax-avoidance in this place we hear the Government claim that the tax gap is reducing—of course, there is a debate and discussion around that—but their own figures for the tax gap do not cover profit-shifting by multinational enterprises. That is becoming an increasingly large problem, especially with issues around digitisation, which my right hon. Friend rightly referred to.

I remember having a discussion with representatives of Facebook when I was in the European Parliament, before I joined this place. Information about the amount of tax it was paying and how much it paid its staff had been leaked—Facebook had not made it public—and it appeared to be paying incredibly low levels of tax. A representative of Facebook said to me, “Oh, you just don’t understand.” I said, “No, I do understand; I have the figures. I just don’t agree with them—that’s where the difference lies.” I think everyone should be able to have those figures, so they can properly assess them.

As has already been mentioned, in February 2016 the Government required multinational companies to provide their tax details, as well as other details relating to revenue, total employment and so on, to the Exchequer, which was obviously a good first step. Then, in the Budget, the Chancellor maintained that he had introduced new measures to improve large business compliance, including the publication of tax strategies. On that point, we have not seen the level of publication of tax strategies that some of us might have hoped for—I hope that will be coming soon.

None the less, that hook at least enabled my right hon. Friend the Member for Don Valley to table an amendment to the Finance Bill to include public country-by-country reporting. I remind Members of what she said of her amendment, which was passed by this House. She said that it

“will enshrine in law support for the principle of public country-by-country reporting with the power for the Government to introduce when the time is most appropriate.”—[Official Report, 5 September 2016; Vol. 614, c. 136.]

That statement includes no qualification that it should happen only when there is multinational agreement on that principle. Rather, my right hon. Friend stated that it should be introduced when the time is most appropriate. I believe that the time is appropriate now, and other hon. Members have articulated very strongly why that is the case.

It is right for the Government to aim to take a lead on this issue. As was mentioned, there is a blockage at EU level at the moment. The European Parliament supports public country-by-country reporting, but there is disagreement in the Council. That is partly because this issue is now bundled in with debates at EU level about having a blacklist of tax havens run by the EU, which is a contentious issue. As a result, we have an opportunity to make a clear statement and push other countries in the right direction by setting an example. In fact, I know the UK has been arguing for disaggregation of figures at EU level. I am pleased to see that, but we now need to show an example. Above all, we need to show how this kind of activity need not lead to comparative disadvantages for our nation—quite the opposite. There is a good deal of existing evidence about the impact of public—

[Mrs Anne Main (in the Chair)]

Order. I ask the hon. Lady to bring her remarks to a close.

[Anneliese Dodds]

I beg your pardon, Mrs Main; I certainly will do. There is lots of evidence already about country-by-country reporting in extractive industries and in banking. Reports from PwC, for example, have shown it to be very successful for companies; it has not been negative for them. We have the examples of SSE, Pearson and others. It has made business sense, and it would make business sense for the UK as well.