Strategizing Multinational Tax Risks

KPMG has provided an excellent overview of Australia’s unilateral efforts to carry out OECD’s proposals.

http://www.kpmg.com/Global/en/IssuesAndInsights/ArticlesPublications/taxnewsflash/Pages/2014-1/australia-effects-of-documentation-country-by-country-reporting-for-australian-taxpayers.aspx

Some key questions include:

• From a OECD perspective, Would penalties be applicable when a Country-by-Country (CbC) template is not completed, if such information is part of the Transfer Pricing Master File?
• The Australian Tax Office (ATO) has already started its process to collect similar information as the CbC template, with 125 review notification letters to be sent to taxpayers, requesting detailed international data and a presentation to the ATO.
• The ATO review would include details of global corporate value chains, including sales, profits, and taxes paid in every jurisdiction, payments to / from low tax jurisdictions, e-commerce and tax risk governance.  The ATO should ensure that confidential information is only shared with other tax authorities in alignment with confidentiality protocols judicially established in each respective jurisdiction.  Additionally, it will be interesting to note how such information is defined, or not defined, by the ATO to ensure information that is collected from taxpayers will be consistent for analyses.

These actions bring forth additional questions re: the OECD proposals, the ATO’s response and advance warnings to taxpayers of how such information will be collected and provided in advance of the OECD’s timelines.  To the extent procedures are enacted by taxpayers to collect such data, while the OECD and other tax authorities provide different rules, definitions and timelines, it will substantially increase time and cost by multinationals to respond to multiple initiatives.

Another point of consideration is the symmetry of ATO’s CbC request with that of the OECD: Will the ATO change their rules to coincide with that of the OECD when such rules are issued, and will the separate country’s legislation trump / override the OECD’s final recommendations?