Public Country-by-country Reporting

Caroline Flint 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.