Public Country-by-country Reporting

Luke Graham Excerpts

Wednesday 22nd November 2017 Westminster Hall

[Luke Graham (Ochil and South Perthshire) (Con)]

It is a pleasure, Mrs Main, to serve under your chairmanship—sorry, chairship. Or is stewardship the right phrase? Apologies.

I will try to keep my comments brief. I commend my hon. Friend the Member for Amber Valley (Nigel Mills) for securing this debate. As an accountant—I refer people to my entry in the Register of Members’ Financial Interests––I am genuinely delighted to speak in this debate. In the light of the Paradise papers, it has become increasingly clear that this issue needs to be addressed. Currently, multinational enterprises are not required to publish the details about the amount of tax they pay in each country that they have operations in, as hon. Members have already mentioned.

As we have heard, the Government have a strong record of closing tax gaps, increasing some of the tax revenue and bringing down the tax gap in our country. Proposals put forward in 2016 introduced provisions requiring multinationals to provide Her Majesty’s Revenue and Customs with an annual country-by-country report, showing how much revenue and profit they earn, how much corporate income tax they pay, and their total employment, capital, retained earnings and tangible assets. That will help HMRC, but that information will not be made public, which will not promote the trust and transparency that other hon. Members have called for.

The debate has therefore shifted, quite rightly, to whether we introduce the public country-by-country reports, and whether we should do so unilaterally or on a multilateral basis. Although acting unilaterally would obviously give us some thought leadership, it could put us at a competitive disadvantage, especially going into the era of uncertainty over Brexit movements.

The UK Government have a strong record of leading tax reporting and combatting tax evasion efforts internationally. They have established quite a comprehensive and effective model, and they initiated some of the country-by-country reporting during Britain’s G8 presidency in 2013. The UK was also the first country to commit to implementing the OECD model for country-by-country reporting, with the provisions in the Finance Act 2016, which have already been referred to.

This is not just a British problem. I am sure that hon. Members have read plenty of reports from our cousins in the United States, where it is estimated that $1 trillion in commercial returns is being held overseas rather than being repatriated to America. That money could go towards restoring half the infrastructure across the entire United States, so there are real gains for countries if they sign up and help with some of the thought leadership on this topic.

This is a timely debate, because in our increasingly connected world—both physically and digitally—transparency becomes more and more important. It is important to my constituents, including business owners, in ensuring real trust in who they are doing business with and how they are doing business, not only in the United Kingdom but elsewhere around the world.

In a previous life, I had the pleasure to work with His Royal Highness the Prince’s Accounting for Sustainability Project, which champions increased reporting requirements, mostly on environmental and social measures. It also champions examples of best practice internationally, to ensure that companies are reporting in the most transparent way and to the highest standards of international practice. Its sister organisation, the International Integrated Reporting Council, has led the way in setting international standards and bringing companies, Governments and other public bodies together to champion and share best practice and to show some of the real returns for investors and customers alike.

As we have seen our economy change, intangibles have become increasingly valuable to companies and investors. I was working on a project just two years ago, and it was estimated that around 80% of the value of the Standard & Poor’s 500 was being held as intangibles rather than as tangible assets. When we start to consider the consequence of these intangibles, it becomes increasingly important that around the world companies need to be as transparent as possible, not only about the physical capital they hold but about their human and social capital.

Clearly, the best approach is to continue pursuing this as an international goal. The Government are right to seek international support—I will support my hon. Friends whenever I can to gain that support—to ensure a comprehensive and effective model for public country-by-country reporting. To that end, I was pleased to note that the European Commission has proposed public country-by-country reporting at EU level, which I know the Government support, and I hope that, regardless of the outcome of Brexit, we will continue to work together to achieve that with the EU and other international organisations worldwide.

--- Later in debate ---

[Dr Rupa Huq (Ealing Central and Acton) (Lab)]

I congratulate the hon. Member for Amber Valley (Nigel Mills), my trusty co-chair on the all-party parliamentary group on anti-corruption, on securing this highly relevant and timely debate, given that it is Budget day. I also congratulate him on his thoughtful opening speech.

With last year’s Panama papers and then the Paradise papers the other week, there is a sense that systems of international finance and taxation seem to be working for the benefit of individuals with access to vast wealth and an army of lawyers, rather than—to coin a phrase—for the many, not the few. We are in the grip of a culture of secrecy and silence in our overseas territories and Crown dependencies, enabling tax avoidance and evasion on an industrial scale. It looks suspiciously like there is one rule for the super-rich and another for the rest of us.

Lord Sugar has blamed “bad advice” for the fact that these sitcom celebrities, sports stars, pop stars, the Duchy of Lancaster and all those other people have been caught up in the latest whirlwind. Lord Sugar said that tax avoidance is un-British and that we are blessed to be

“in a country that has a police force, a National Health Service, an army…and all the good things we get here.”

To the delight of Transparency International, Christian Aid and Global Witness, we were promised Government action by David Cameron in the flurry of the 2016 anti-corruption summit, but the Government seem to have fallen disappointingly short. Country-by-country reporting, which we are addressing in particular today, is an issue that I first came across as a candidate in 2015. Before I was elected, I experienced my first mass email petition from potential constituents. It was called, “What will you do to crack down on tax dodging?” I assured them I would insist that multinational companies are required to publish details of the amounts of tax they pay in their countries of operation.

As soon as I was elected, I was happy to back the “show us the money” amendment tabled by my right hon. Friend the Member for Don Valley (Caroline Flint). When the Criminal Finances Bill came before the House, I spoke from the Opposition Front Bench on the need for public registers of beneficial ownership. Then we had the snap election and the legislative provisions were swirled into the vortex of wash-up. For this Government, “could do better” is perhaps an understatement. In 2012, David Cameron declared that organisations investing in complicated schemes

“to just minimise their tax rates is not morally acceptable. Some of these schemes…are quite frankly morally wrong.”

Even if he acted within the letter of the law, the behaviour of Bono of U2 was close to the edge.

Financial secrecy feeds into legal and illegal approaches to not paying a fair share. Last year the Conservative Government said that all countries needed to reach a gold standard of public registers of beneficial ownership, yet there has been a palpable rowing back. Now the Foreign Office only expects UK tax havens to go down that road when it becomes a global standard. Montserrat has already committed to put in place a public register. We have a duty to justify our claims to be a global leader on transparency and anti-corruption by facilitating that, rather than ducking the challenge in a dereliction of duty. The tax abuse in the Paradise papers and the corruption in the Panama papers are two sides of the same coin of financial secrecy. In both cases the Government’s stated intentions are undermined by their willingness to tolerate offshore financial secrecy.

The Cameron Government at least made the right noises. I have to see the detail of what was announced in the Budget statement, but I am cheered by the idea of extending offshore time limits. Until now, however, the Prime Minister—who is often responding to events rather than mastering them, being in office but not in power, and all that stuff—seems to have had a comparatively lackadaisical attitude.

[Luke Graham]

Will the hon. Lady give way?