Last week, the Task Force on Financial Integrity and Economic Development held its 2011 conference in Paris. On Thursday morning they had a question and answer session on country-by-country reporting, and they invited questions from Twitter users. As tends to happen in these sessions, the questions were rather dominated by critics rather than supporters. And, by jove, despite the presence of Richard Murphy on the panel, I managed to get a question answered:

And here came the answer:

OK, because he's given me just a single tweet in response, and it might be presumptuous to take it as read that he agrees with E&Y's assessment (on past form, I suspect he may not), I can only take it at face value. But, assuming that E&Y are right, it means that country-by-country reporting will be phenomenally expensive.

This month's Accountancy magazine has a table of the audits of the FTSE 100. This says that the audit fees for the entire FTSE 100, excluding audit-related fees and non-audit fees, were some £521.8m ¹. Therefore, applying E&Y's 25% uplift, country-by-country reporting would add £130 million to the cost of audits of these companies. And that's only for the biggest companies; there are many other UK listed companies with international operations, albeit with lower audit fees because of their smaller size.

And it gets worse. UK pension funds don't just invest in UK companies; they also invest in foreign companies. So, to the extent that country-by-country reporting might get mandated in Europe, these funds - our retirement - will also be hit by the additional costs.

Remember, Ritchie expects the companies to just eat these costs. While there may be some indirect benefits for investors, the main purpose of these proposals is to help NGOs badger governments. Governments, in the main, don't need country-by-country reporting because they have the ultimate sanction - "give us the information we want or we won't let you trade here". There are even doubts as to whether country-by-country reporting would provide sufficient information for Ritchie and the NGOs to derive meaningful and accurate conclusions about the tax compliance of multinational firms. 

So unless the NGOs feel like cutting a cheque (and they may have some difficulty explaining this in terms of their charitable objects), on what basis do they feel they have any right to demand that the pensions of ordinary working people be punished annually to the tune of hundreds of millions of pounds for their ridiculous vanity project?

People who read this post also read:

• A very strange idea indeed
• Ritchie’s belt and braces approach to Amazon’s tax affairs
• HMRC’s view of country by country reporting
• Why pensions tax relief should be at the marginal rate
• Yet more Ritchiebollocks

Filed under: Politics, Taxation with tags country by country reporting, ernst and young, ftse 100, pensions, richard murphy