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EU Tax Reforms And Imminent Transparency Online Register

The move towards total corporate transparency took two huge steps this week. Tax avoidance and evasion are the main targets of both.

But while the EU “Action Plan” has received a warm reception, Boodle Hatfield raised concerns about the UK initiative:

  1. the EU is to revisit 2011’s Common Consolidated Corporate Tax Base in an attempt to reform the way businesses record and report their tax;
  2. In the UK, concerns are raised about the PSC Register, as similar concept, which will be effective from April next year.

EU CCCTB Mandatory, but phased

The original talks around the Common Consolidated Tax Base hit a brick wall. But with global tax transparency the byword for so many initiatives, the European Commission wants to give the legislation fresh legs.

The first phase will be achieving one common database for the member states. This harks back to another proposal from earlier this year.

That was the “Tax Transparency Package” (see, told you it was a hot topic), aimed at all member states. Its essence was based on the need for immediate reporting on decisions each member’s government made on its own corporate tax issues.

The second phase, the spanner in the works to date, is consolidating this information. What shape a consolidated database may take, and the level of reporting therein, we could know as soon as 2016.

Are all member states capable of collating and sharing their tax data?

There are member states who will oppose the sharing of such information. Who knows what level of penetration each country can forcibly execute. Given the varying corporate backdrops, resources and ability to extract a uniform set of data, some governments will struggle more than others.

To that end, The European Commission has launched a public consultation. It’s inviting interested parties to comment on the level of public taxation information corporations should volunteer.

With the main Action Plan encompassing even those countries who are unwilling or unable to cooperate, there’ll be few places for illegitimate businesses to hide.

PSC: when does transparency cross the privacy line?

And that leads us perfectly into the next snippet of information, for those closer to home. It seems that whatever ruling the EU Action Plan eventually formulates, the practises within will already make up the British corporate landscape.

From January next year, the information that incorporated UK companies need to make public is set to increase. By April, they must be in a position to share these additional details with Companies House. They, in turn, will make that (some may say sensitive) information public.

It’s the combination of the type of information that companies will have to share with how third parties can use that information that’s rattled the law firm who’ve highlighted the potential privacy issue.

Boodle Hatfield feel that legitimate business owners may have to share hitherto confidential information in order to catch out those hiding behind registered companies for the wrong reasons.

The argument for the defence, which you can hear already, is that if you’re legitimate, why worry about sharing it? But not everyone wants to declare to the world how profitable (or loss-making) their enterprise is.

What’s going to change about the information companies share?

The biggest change in the register, compared to the publicly declared company information already available, is the disclosure of names of controlling interests with a share of 25% or more of registered companies.

Geoffrey Todd, a partner at the law firm, also highlighted the difference in UK an EU legislation. Yes, the EU wants a similar list of beneficiaries. But much more of the information their charter calls for will remain private.

It’s interesting. On one hand, the new government wants the UK to be central to the world’s money markets. But on the other, information the UK Government requires companies registered here to share goes beyond that anywhere else on the globe. Counter-intuitive or pure genius?

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