Parliamentarians push for greater transparency in international tax

Parliamentarians attending a global tax transparency summit in London urged governments to support public country-by-country (CbC) reporting of multinationals’ profits and taxes so that citizens can “see for themselves what tax multinationals pay.”

Public disclosure would give people in developing countries access to “crucial information” about multinationals’ activities in their countries and whether multinationals are paying a fair share of tax, according to an open letter signed by 26 parliamentarians at the conclusion of the meeting, hosted by the UK House of Commons Public Accounts Committee (PAC) on December 9 …

Pascal Saint-Amans, director of the OECD Centre for Tax Policy and Administration, told delegates that in recent years, significant progress had been made toward transparency “but also towards fighting tax avoidance, which is not [only] an issue of transparency but also an issue of changing all the rules of the international tax system.”

Read more: My news story for Tax Analysts, 9 December (paywall).

Lack of transparency is BEPS project’s big failure, campaigners say

The OECD’s base erosion and profit-shifting project “simply hasn’t delivered” to date, and country-by-country (CbC) reporting has been its “big failure,” a leading tax campaigner said, while a senior HM Revenue & Customs official countered that a belief in transparency does not mean that everything should be published.

Both Tax Justice Network (TJN) Chief Executive Alex Cobham and HMRC Executive Chair Edward Troup spoke December 9 during the global tax transparency summit in London, hosted by the House of Commons Public Accounts Committee.

The introduction of CbC reporting has been handled “so badly that developing countries are now exposed to worse inequalities” in terms of taxing rights, according to a TJN report released December 8.

Read more: My news story for Tax Analysts, 9 December (paywall).

HMRC resources are the key to better customer service, panellists say

The UK government should stop cutting staff at HM Revenue & Customs and consider extending the cooperative compliance model to small and medium-size businesses, according to leading tax experts.

HMRC was not represented at the second meeting of the All-Party Parliamentary Group (APPG) on Responsible Tax to consider trust in HMRC, held at the House of Commons on December 7 and chaired by Margaret Hodge, Labour member of Parliament and former chair of the Commons Public Accounts Committee (PAC).

A few doors away, HMRC Chief Executive and Permanent Secretary Jon Thompson was defending before the PAC the tax agency’s use of “customer relationship managers” to work with high-net-worth taxpayers. Thompson will address a third APPG meeting in private, Hodge said.

Read more: My news story at Tax Analysts, 8 December (paywall).






Draft UK interest measure omits key details

Tax professionals may have just two months to consider proposed new rules restricting corporate tax deductions for interest paid by many of the UK’s largest businesses. A measure to implement action 4 of the OECD’s base erosion and profit-shifting project is set out in draft finance bill clauses published for consultation on December 5 and intended to take effect from April 1, 2017, but many of the detailed rules may not be published until the end of January 2017 …

The draft legislation includes the core provisions setting out how a new fixed ratio rule and a modified debt cap would apply for most groups, and the rules for calculating the group ratio rule and the allocation of any restriction to companies in the group. But a number of provisions, including definitions for a group ratio rule and an exemption for investment in long-term infrastructure projects for the public benefit, may not be available until the end of January 2017.

Read more: My news story for Tax Analysts, December 5 (paywall).

UK lawmakers urge HMRC to lead tax transparency debate

HM Revenue & Customs and HM Treasury should “lead the global debate for public country-by-country reporting” and push for international agreement on its introduction, the House of Commons Public Accounts Committee (PAC) said as it reiterated a call for greater transparency in large multinationals’ tax affairs.

HMRC must also take urgent action to avoid a further “disastrous decline” in customer service as it addresses the challenges of spending cuts, a major reorganisation, and the implications of Brexit, the PAC said in a report on HMRC’s performance in 2015-16, published on December 2.

Read more: My news story for Tax Analysts, 1 December (paywall).

The PAC report is here.

HMRC figures indicate increased focus on transfer pricing

The amount of corporation tax under consideration by HM Revenue & Customs in connection with profit shifting increased by 60 percent, to £3.8 billion, in the year ending March 2016, according to figures obtained by the law firm Pinsent Masons. This suggests that the tax authority may be taking a fresh look at transfer pricing issues, the firm said …

“The tax under consideration is an estimate of the maximum potential additional tax liability in each case before we have carried out a full investigation of the specific facts or analysis of relevant law,” HMRC said in the October 2016 edition of “Measuring Tax Gaps”. “It is not actual tax either owed or unpaid; it is a tool to guide our inquiries …”

Read more: My news story for Tax Analysts, 1 December (paywall).

UK marks transfer of ‘landmark’ income tax powers to Scotland

The Scottish government will have unprecedented power to shape the country’s economy, the UK government declared as the Scottish Parliament’s new power to set income tax rates and thresholds came into force.

The regulations — released on November 30, St. Andrew’s Day — bring into force a Scotland Act 2016 measure giving the Scottish Parliament the power to set different rates for Scottish taxpayers. The new power may be exercised for the tax year 2017-18 onward for income other than savings and dividends. Power to set the level of the personal allowance is not being devolved …

“These powers are being transferred while maintaining for people in Scotland the benefits of being part of a strong United Kingdom,” said David Mundell, the UK’s secretary of state for Scotland, even as tensions over the results of the June 23 EU referendum continued to dominate the political agenda. A majority of Scots (62 percent) voted to remain in the EU and Scottish first minister Nicola Sturgeon has indicated that a second referendum on Scottish independence from the UK remains an option if the UK takes a hard line in the Brexit talks.

Read more: My news story for Tax Analysts, 30 November (paywall).

UK defends insurance tax increase as insurers denounce ‘hammer blow’

The UK government has defended a third increase in the standard rate of insurance premium tax in under two years, but economists told lawmakers that if the tax is being used as a substitute for VAT, the new 12 percent rate cannot be justified.

“Insurance premium tax in this country is lower than in many other European countries, and half the rate of VAT,” Chancellor of the Exchequer Philip Hammond said as he delivered his autumn statement. “In order to raise revenue, which is required to fund spending commitments I am making today, it will rise from 10 percent currently to 12 percent from next June…”

“The government clearly sees insurance premium tax as a cash cow,” said the tax faculty of the Institute of Chartered Accountants in England and Wales. The faculty pointed out that while the government described the IPT as a tax on insurers, it is “collected by insurers on behalf of [the] government from policy-holders.”

Read more: My news story for Tax Analysts, 29 November (paywall).