Wednesday, January 13, 2010

Forbes: A Smarter Way To Tax

TJN senior adviser Richard Murphy is in Forbes magazine, with a fine article about country-by-country reporting.

"Few companies are more aggressive in shifting profit than the banks that got us into our current financial mess.

The trouble is they can get away with doing so because finding out what they’re doing is difficult. For example, tax havens do not require the subsidiaries of multinational corporations to publish accounts and profit is shifted into these places through what is called intra-group trading. This is trading between companies in the same group.

And the answer?

"There is a solution to this problem. It is a new form of corporate accounting which could be included in published corporate reports of public corporations. This is called country-by-country reporting. Described simply, this would require a multinational corporation to publish a profit and loss account, including detailed information on tax paid and labor numbers and costs, plus a limited balance sheet, for each and every jurisdiction in which it traded.

No exceptions would be allowed. That profit and loss account would also show, unlike existing financial statements, the split of activity between intra-group and third party trade."

Of course, better to read the whole article. Our briefing paper on country-by-country reporting can be found here.

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