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Tax Design and Administration in a Post-BEPS Era: Towards Public Country-by-Country reporting?

The OECD’s Base Erosion and Profit Shifting (BEPS) initiative was in large part a response to the global economic crisis of 2008.  In 2020 we are witnessing an even greater economic crisis and in the current global economic circumstances, the OECD’s BEPS program of tax reform appears to be more important than ever.  Government fiscal support packages around the world are growing in magnitude and new ones or extensions are announced almost daily.  The combination of significant rises in government spending accompanied by equally significant declines in tax revenue will no doubt prompt jurisdictions to scrutinise closely their tax and transfer systems with an eye to longer term fiscal recovery and sustainability. 


While many businesses will need ongoing support to ensure economic survival and recovery, others have fared relatively well from restrictions in movement and lockdowns.  Many multinational entities have been less affected by these adverse events, with a number of large technology businesses, for example, emerging relatively unscathed and, in some notable cases, with greatly increased profits.  It is these multinational entities that have been much of the focus of the BEPS reform agenda with initiatives such as Action 13, Transfer Pricing Documentation and Country-by-Country Reporting that requires all large multinational entities to report to revenue authorities data on the global allocation of income, profit, taxes paid, and economic activity in the jurisdictions in which they operate.  The theory is that with Country-by-Country Reporting, revenue authorities will be able to identify better transfer pricing anomalies and ensure the correct collection of tax. 


In “Tax Design and Administration in a Post-BEPS Era: A Study of Key Reform Measures in 18 Jurisdictions” we authored a General Report that identified Country-by-Country Reporting set out in Action 13 as one of the most controversial BEPS Actions.  We further suggested that this was most likely due to its impact on taxpayers and the tax profession not only in terms of additional compliance costs but concerns around exposure to additional risk assessments and revenue authority audit activity.  Action 13 is a “minimum standard”, meaning it is mandatory for jurisdictions signing on to the BEPS Inclusive Framework. 


The majority of jurisdictions that provided chapters for the volume had implemented Country-by-Country Reporting in some form but the means of doing so varied between jurisdictions.  In some cases, jurisdictions introduced new legislation to mandate the production of Country-by-Country Reports while others were able to rely on unused powers under existing laws.  With the introduction of widespread mandatory Country-by-Country Reporting, taxpayers expressed concern that revenue authorities may use the information for purposes other than transfer pricing assessments and that in the future mandatory reports will become publicly available.  We noted at the time that the latter possibility may not be remote. 


The OECD’s BEPS Action 13 report provided for a review of this minimum standard that was to be completed by the end of 2020.  In early February 2020, the OECD released a Public Consultation Document and invited comments.  While this document did not raise the direct question whether Country-by-Country Reports should be made available to the public, submissions did so.  A few months later, in May 2020, the relationship between Country-by-Country reporting and the Global Reporting Initiative (GRI) Standards for tax was discussed at a public consultation meeting organized by the OECD.  The GRI standards are a product of a Netherlands-based international organization, the Global Reporting Initiative, established to promote global transparency in all aspects of corporate governance and impacts.  In 2019 it released global standards for transparent reporting of tax affairs by companies.  The GRI tax standards called for public release of Country-by-Country Reports from January 2021. 


A member of the expert Technical Committee tasked with the development of the GRI standard for Country-by-Country Reports, Richard Murphy, a chartered accountant who founded the Tax Justice Network, has argued forcefully for the OECD to incorporate the GRI standards and public disclosure element in its Country-by-Country Reporting standard.  Like others who call for Country-by-Country reports to be made public, Murphy (and the GRI) argue public reporting provides a better understanding of how an organization contributes to the economies in which it operates, leads to increased confidence and accountability, promotes trust in the tax practices of taxpayers and systems, and provides information for stakeholders thereby informing public debate.  It remains to be how the OECD Review of the implementation of Action 13 due at the end of this 2020 will address the calls for Country-by-Country reports to be released publicly.


Also in our General Report, we noted that the OECD would be releasing a Corporate Tax Statistics dataset as part of Action 11 of the BEPS program that focused on the measuring and monitoring of BEPS.  Our report highlighted the OECD’s recognition of a lack of quality data on corporate taxation and emphasised that it was a major limitation to measuring the effects of tax avoidance as well as the effects of any BEPS measures introduced.  Subsequently, in conjunction with its Action 11 obligations, the OECD in January 2019 launched a Corporate Tax Statistics database providing a limited amount of information.  This database has been augmented since, and on 8 July 2020 the OECD added new data that provided aggregated information derived from Country-by-Country Reports it had received from member jurisdictions.  This data is based on anonymised and aggregated Country-by-Country Report statistics from a single year of data, 2016.  While the release provides more information than has been available to the public previously, it remains far from the release of information sought by those seeking public release of Country-by-Country Reports.


We examined the data for our own country to evaluate the possible value to of the information provided.  In the 2016 tax year, the Australian revenue authority had received 1,280 County-by-Country Reports, with most coming from five jurisdictions: the United States, Singapore, the United Kingdom, China, and Hong Kong SAR.  The leading business activity disclosed in terms of dollar value was the provision of services to unrelated parties.  Switzerland, which appeared on only 13 of the 1,280 County-by-Country Reports received by the Australian tax authorities, accounted for the highest value of related party revenues, followed by Bermuda, a close second.  No doubt the data provided no surprises to tax specialists.  At the same time, it reveals little about tax behaviour to others.  Its importance may be greater than appears, however, if it proves to be the first step along a path to greater public transparency.  The OECD’s review at the end of the year and responses to the review may provide further insights on the likelihood of County-by-Country Reports becoming public information in the future.



Read more about the impact of BEPS on global tax administration in Fiscal Publications book - Tax Design and Administration in a Post-BEPS Era: A Study of Key Reform Measures in 18 Jurisdictions (authored by Prof Sadiq with Prof Adrian Sawyer and Dr Bronywn McCredie)


For more info on the BEPS project - visit the OECD website here

About the author

Kerrie Sadiq & Rick Krever

Kerrie Sadiq & Rick Krever

Professor Kerrie Sadiq BCom, LLB (Hons), LLM, PhD, CTA, GAICDCA, CPA, holds the position of Professor of Taxation in the School of Accountancy at the QUT Business School, Queensland University of Technology. She is a Senior Tax Adviser to the Tax Justice Network (UK), a Chartered Tax Adviser as designated by the Taxation Institute of Australia, a CPA and a CA. 

Find further details about Professor Sadiq here


Professor Rick Krever LL.B, LL.M is a Professor in the Law School of the University of Western Australia. He is a researcher in taxation law and policy, working with international aid agencies and international organisations to help build revenue capacity in developing nations.

Find further details about Professor Krever here