Multinational corporate tax reporting transparency ‘could boost smaller countries’ development’

10 Mar 20

Multinational companies could make a “significant contribution” to the sustainable development of many economies around the world if their profits and taxes were more transparent, according to a group of experts.

 

The Independent Commission for the Reform of International Corporate Taxation has responded to an OECD review into country-by-country reporting standards requiring large multinational businesses have to produce a report of data on its income, profit and taxes paid among the jurisdictions it operates in.

ICRICT – a group of tax experts from around the world campaigning for a change in tax rules to benefit the public interest – said the OECD standard needs to go further.

“Greater transparency could unleash the potential of companies to make a significant contribution to sustainable development,” the group said in its response to the review.

“A central problem in today’s corporate tax system is the secrecy surrounding information about where corporations do business and what they pay in tax in those countries.”

The OECD standard needs to converge towards the “more robust” Global Reporting Initiative standard, which includes reconciliation with global, consolidated group accounts, ICRICT said.

And the threshold for businesses to be required to produce a report should be lowered, too, the group insisted.

Currently, the OECD only requires a country-by-country report from firms with €750m or more in annual turnover, but ICRICT said this is “inappropriate for many smaller economies, where smaller multinationals can be responsible for larger shares of economic activity”.

The group said an “obvious” solution would be to bring the OECD rules into line with the EU definition of large enterprises: those with a turnover of €40m annually.

Transparency – the raison d’être of the standard in the first place – would also be helped by giving better access to the reports to tax authorities (particularly those in smaller and lower-income countries) and the public, ICRICT said.

“Full publication of the data would… help create a level playing field among reporter companies and eliminate much of the secrecy that facilitates tax avoidance by multinationals”, the response read.

The OECD is reviewing its reporting standards with the hope of increasing the quality of data available on corporate tax and making it easier to measure tax avoidance.

Estimates of the impact of tax avoidance on government coffers around the world each year vary, from $100-240bn according to the OECD to $600bn according to the IMF.

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