Professor of political economy City, University of London
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Richard Murphy: Why we need an IFRS for tax

12th Jun 2019
Professor of political economy City, University of London
Columnist
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Financial technology concept
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Better accounting for tax has long been a focus of tax justice campaigners. Richard Murphy explains why a new IFRS for tax is necessary, and why accountants have a duty to society to help companies explain their tax payments.

One of the first things that the Tax Justice Movement created was the demand for country-by-country reporting by multinational corporations. I wrote the first version of that in January 2003. Sixteen years later it is in widespread use for tax reporting.

I am assured it is working, in the sense that it is identifying where and in what amount tax risk is located within those companies reporting using that standard. But so far, it is only tax authorities that see the benefits of this type of reporting, which has now been proven (despite all the claims once made to the contrary) to be entirely possible.

It is true that the EU Commission and EU Parliament are trying to deliver rather inadequate forms of such a standard. And I am delighted that the Global Reporting Initiative (GRI) is now close to issuing its own standard, but it will be voluntary. That means compliance will be patchy, and probably absent in the companies we really need to know about.

The fact that the OECD, EU and GRI have all had to try to create standards points to one common thing: the accounting profession and its accounting standard setter, in the form of the International Financial Reporting Standards (IFRS) Foundation, have so far refused to engage with this issue. 

Their justification for not doing so is two-fold. The first is that the demand for this data is political. That claim is disingenuous, since all choices about what to disclose in accounts are, inevitably, political. 

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