Tuesday, March 13, 2012

News from the tax transparency movement

Richard Murphy links to this review of an international tax conference hosted by the Oxford Centre on Business Taxation, in which the author quotes Lord Hollick, a businessman and influential member of the UK House of Lords Economic Affairs Committee:
"In a world of globalisation, how do single countries hold corporations to account? . . . It's hard to work out how much tax is paid where.  The disclosure regime does not get to the heart of the issue.  We need full disclosure. ... Having been an executive of a large corporation, I would be happy to do this. Companies should pay a fiar rate of tax.  We should move vigorously towards the path of transparency."
Murphy adds: "good for Lord Hollick. You can't keep a good idea down and country-by-country reporting is an idea whose time has come."

I've been working on a chapter about the rise of the tax transparency movement and its connection to economic development, will post a link to a draft soon.


  1. Canada does this to some degree in terms of determinining provincial corporate income tax. Companies report on their federal corporate return the amount of business they did in each province and then pay the particular provincial corporate rate on the amount they reported to the Federal govt/CRA as allocable to that province. All provinces other than Quebec and Alberta also have their provincial corporate income tax collected by the Canada Revenue Agency and use the same T2 Corporate Return. Quebec and Alberta have their own return and collection agencies but participate in this "allocation" agreement. However, there are STILL problems where companies are to shift gains and losses around to different provinces to gain favorable tax treatment.

    I attached a link the Canadian T2 Schedule 5 return below. It is actually kind of neat in terms of elegance compared to the messiness and hijinks played in the US State corporate income tax world. On Page 2 there is a grid showing all of the provinces and territories of Canada and then how to calculate the allocable income to each one.


  2. The other neat thing Canada accomplished was creating a multi rate by jurisdiction destination based VAT(that's a mouthful and I a not completely sure I got that right) something many "smart" people in Europe who specialize in VAT's did not believe was possible. Essentially through the so-called harmonized sales tax system the Federal government collect on behalf of five provinces an additional amount of consumption tax points based on the 5% GST base ranging from a combined 12% GST/HST in British Colombia to a 15% GST/HST in Nova Scotia. All GST/HST revenues go into a central pot in Ottawa and then divided back out the participating provinces based on the share of national consumption calculated each year by Statistics Canada.

    Below is a link to a Canada Revenue Agency video describing how the system works from the standpoint of a business owner who has to collect GST/HST.