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Country-by-country profit reporting gets closer

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22nd Nov 2013
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The Treasury has published its review of submissions made to its consultation on country-by-country reporting that will be required from financial institutions, mainly banks, under the EU’s Capital Requirement’s Directive (CRD).

From July 2014, under the CRD, institutions affected will be required to publish their turnover, number of employees, profits earned, taxes paid and subsidies received on a country-by-country reporting basis.

This will require companies to reveal how much money they make in countries and making their tax arrangements clearer and more accountable, tax campaigners argue, amid public anger over corporate tax avoidance.

Multinationals such as Google, Amazon and Apple have been criticised for legally shifting profits to countries with lower tax rates, thereby lowering their tax bill.

In its review of responses to the consultation the Treasury dismissed claims by some respondents that country-by-country will place an excessive burden on business.

It also said that smaller businesses will already have most of the data in their annual reports so complying with the new rules shouldn’t be too onerous, or mean that they should be exempted.

Most respondents agreed that the government should, where possible, attempt to ensure the implementation of country-by-country reporting is consistent with the approach adopted by other countries, the Treasury said.

The Treasury said its preference is for “accounting consolidation” – an approach used by the majority of member states in the EU.

Tax blogger and campaigner, Richard Murphy, wrote that the outcome of the consultation was better than he had hoped.

“Banks will have no choice but prepare country-by-country reporting data from July 2014 with it being audited in its second year onwards and with that data being required to reconcile with audited accounts.

"The tax data may be naively chosen and simplistic in style but in that case we’ll use it at face value as a measure of what is really going on in each country where a bank operates to reveal how much (or how little) they pay by place,” he said.

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