Country-by-country reporting “daft”, House of Lords told

THE INTRODUCTION of a formulary apportionment tax system is a “completely daft idea”, the House of Lords Economic Affairs Committee has heard.

Also known as country-by-country reporting, the system sees profits made by multinational corporations declared in each jurisdiction they operate in and taxed accordingly, with the aim of preventing profit shifting and tax base erosion.

However, such a system would see the UK relinquish tax sovereignty to the EU or another international body – a situation Deloitte’s head of tax policy Bill Dodwell told the committee would be “completely daft”.

The US operates a similar system between its states, which sees employment driven from one state to another for tax efficiency purposes, the lords heard. Indeed, with as many as 20 different tax methodologies in place, the US does not promote the system to the OECD, the panel comprising Dodwell, Ernst & Young’s Chris Sanger, PwC’s Richard Collier and Mercer & Hole’s Adam Broke said.

That evidence, though, was disputed by pepresentatives of non-government organisations also in attendance.

“One of the things in the full version of country-by-country reporting would be to pull out the nature of intra-group transactions and disclose those separately by country so we could see just what multinationals are doing to shift profits,” Tax Research UK founder Richard Murphy said.


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