Thanks to Peter Draper and team for this policy briefing and discussion documents on Country-by-Country reporting.
Multinational enterprises (MNEs) can shift profits away from jurisdictions with comparatively high tax rates to jurisdictions with lower to no tax rates, and so avoid paying their fair share of taxes without breaking any single jurisdiction’s laws. This is in part possible owing to the restricted exchange of information between national tax authorities, which limits these authorities’ capacity to conduct accurate MNE audits.
The implementation package on Country-by-Country Reporting for Action 13 of the BEPS project, published on 8 June 2015, foresees that tax authorities will automatically exchange key indicators (such as profits, taxes paid, employees and assets of each entity) of Multinational Enterprise Groups with each other, therewith allowing tax authorities to make risk assessments as to the transfer pricing arrangements and BEPS-related risks, which may then serve as a basis for initiating a tax audit. OECD Automatic Exchange portal.
By creating standard reporting templates and model legislation to collect MNEs’ relevant business information, Action 13 of the Organisation for Economic Co-operation and Development (OECD)/G20 Base Erosion and Profit Shifting Action Plan – Transfer Pricing Documentation and Country-By-Country Reporting – is seen as part of the solution to addressing MNE tax evasion. While representing a substantial step forward, the proposed set of recommendations has a limited scope and is technically onerous to implement in poor developing countries, where revenue authorities are severely resource-constrained. These issues are reviewed in relation to African resource mobilisation needs, and with an eye to the 2020 review of country-by-country reporting (CbCR) implementation.
To view/download the policy paper click here!
To view/download the discussion paper click here!
Source: Tutwa Consulting Newsletter June 2017