An event yesterday evening in the City of London brought together tax policy experts from big multinational companies, accountancy firms and law firms to discuss the big issues in tax over the next few years. The event was aptly titled The Great Tax Debate. Topics included such things as transfer pricing, taxing financial transactions, simplifying the UK tax system and the general political environment. There seemed to be consensus that tax – especially company tax – has a much higher public profile now than ten years ago. ActionAid supporters have definitely played a part in this!
The focus of the speakers was largely on the context for UK based companies. Their main concern was with the simplicity or rather the complexity of the tax system. While the UK government is in favour with this group because of the plunging corporate tax rate there was criticism of the way that the big emerging economies are taxing multinational companies.
Brazil, China and India were cited as countries that are not conforming to ‘accepted’ international tax practice, created by the rich countries through the OECD. It was noted with animosity that the emerging as well as developing countries are working to change the international rules on transfer pricing through the UN. From the perspective of multinationals this is a big no-no because more than one version of the rules is claimed to be a real headache. While that might be true – we know that many companies are able to benefit under the current system by shifting their profits to tax havens.
On tax dodging, there was much discussion about the extent to which companies are involved in aggressive tax avoidance and tax planning with a kaleidoscope of responses to that. Some asserted that aggressive tax avoidance is a thing of the past. Others said that accounts and profits are to some extent fictional because there are so many tax loopholes for companies to take advantage of, making tax planning inevitable.
In response to a question from ActionAid about how companies should be considering their tax payments as part of their corporate citizenship there was acceptance of this concept. One speaker referred to the situation in Japan where companies allegedly see it as an honour to pay tax and all aspire to be at the top of the government’s list of the largest taxpayers.
Ultimately we need far greater corporate transparency in order for the public to be able to judge whether a company is paying its fair share. With so much more media exposure for tax dodging it is increasingly likely that companies will be willing to explore what that transparency should look like.