Ahead of last week’s Brexit vote, there was suggestion that the likes of Google and Amazon might change their plans to build new UK HQs in London if we chose to Leave.
What was pitched as a negative outcome has, of course, now been realised.
But one interesting area that hasn’t yet been explored in detail is the potential tax arrangements the UK may now end up with post-Brexit – and where that might leave multinationals criticised for avoiding it.
Earlier this week, senior MPs from Germany, Hungary, Finland, Norway, Slovakia, the Czech Republic and Bulgaria, sent an open letter to the UK parliament backing country-by-country tax reporting.
This measure has been sketched out in detail by the Organisation for Economic Co-operation and Development in its ‘Base Erosion and Profit Shifting (BEPS) Action Plan’. It’s designed to ensure that big companies cannot use tax loopholes in different jurisdictions to avoid tax.
This initiative is now being explored by the European Commission and UK MPs, backed by the Public Accounts Committee (PAC), are trying to add this as an amendment to the Finance Bill.
The bill is currently at the committee stage of passage through the House of Commons and amendments were due to be looked at in detail this week.
Meg Hillier MP, chair of the PAC, again poured particular scorn on a certain search company in her comments released with the letter of support from European legislators.
She said: “Our Committee believes strongly that the tax affairs of multinational companies should be open to public scrutiny.
“Businesses use complex strategies to minimise their tax bills and the lack of transparency over these arrangements does nothing to build confidence that corporations are paying their fair share.
“The public anger that followed the announcement this year of Google’s £130 million tax settlement with HM Revenue & Customs is just one example of the strength of feeling among ordinary taxpayers.”
The signatories to the letter believe that between €86 billion and €207 billion is lost in income tax revenues every year.
The amendment to clause 149, which would require companies to “publish a tax strategy annually” has been tabled by Labour MP Caroline Flint, who sits on the PAC.
Flint told NS Tech: “The economic instability forecast in the event of a Brexit vote has come to pass, and with it the last nail in the coffin of the chancellor’s deficit to surplus plan.
“Just last week, the government had an opportunity to take a lead in the battle for multinational tax transparency, and ducked it. Instead he is engaging in a corporation tax race-to-the-bottom, with the likes of Ireland.
“The Finance Bill is not yet passed, and if the chancellor does not move on this, my parliamentary colleagues and I will be making further attempts to push this principle in the Autumn.”
Emily Kenway, director of tax accreditation organisation Fair Tax Mark, said she does not hold out great hope that the UK will continue to work with EU neighbours on this issue.
“Brexit looks likely to mean lower taxes and lower regulation in the UK, combined with us not being part of EU-wide negotiations around tax even though tax is, of course, a cross-border issue,” she explains.
“In essence, this means the UK becomes even more of a tax haven than it already is.
“The European Commission is assessing public country-by-country reporting and is due to provide an impact assessment in spring 2017. Unfortunately, Brexit means we’ll likely lose the opportunity to be part of that important work and other tax-related negotiations.”
So, rather than seeing companies like Google and Amazon, both heavily criticised for their global tax arrangements, leave the UK, we could become a beacon for those wishing to sit outside tighter EU tax rules.
This could mean more jobs in London at high-tech companies, but at what cost?
Kenway has called on tech companies to join the rigorous Fair Tax Mark accreditation scheme, which works like a kite mark for tax.
“With the likes of Google treating tax as optional instead of their legal duty, we’re keen to see more challenger tech companies join us and show leadership on paying their fair share of tax,” she said.