David wrote today’s Thunderer column in The Times, and in it called for public disclosure of the tax affairs of British corporations to avoid a repeat of the recent Barclays saga.
The full article can be found below:
“It is important that the Government reacts to Barclays’ doubtful tax practices not just by heaping opprobrium on business, but by finding a solution that stops it happening again. This episode is the latest example — coming after the Vodafone and Goldman Sachs sagas — of a very big problem with the way that Revenue & Customs handles the tax affairs of large corporations.
The fundamental problem is the secrecy with which the Revenue treats corporate tax affairs. Because corporations are “legal personalities” they enjoy the same confidentiality as is properly given to private citizens.
As a result, tax dealings between corporations and government are done in the dark and the complex tax affairs of public companies are anything but public. Draconian penalties fall on any official who breaks this omertà.
No wonder the public suspects that big business is treated far more gently than ordinary people. It is time that the Government shone daylight on to these murky matters. All plcs already publish a detailed financial report and accounts every year. They should also be required to publish a detailed account of their tax affairs at the same time, ideally before their AGM.
There is no commercial confidentiality argument against this. Tax advantages exist to encourage publicly beneficial behaviour, not to give a secret competitive advantage to one company over another.
There is nothing intrinsically wrong with companies trying to reduce their tax bill. Indeed directors have a duty to the shareholders to do exactly that. So why should their efforts be secret?
I strongly favour the lowest possible corporation and capital gains tax rates, but this is only possible if evasion and avoidance rates are low. The incentive effect of low tax is lost if even lower rates are set in secret and are available only to those big enough to strike a deal with the Permanent Secretary for Taxation.
The only serious objection is that it would drive away business in search of privacy. This is nonsense, as we are dealing with large public companies for whom such an avid search for secrecy would carry a serious reputational risk. I do not see too many of them seeking a listing in Luxembourg, Liechtenstein or the Cayman Islands.
Nations as diverse as Sweden and Japan take even more open approaches without any discernible disadvantage. So rather than resorting to the constitutionally improper tactic of retrospective legislation, the Treasury should use the next Budget to announce its intention to bring the tax affairs of public companies into the public domain, where they belong.”