This is a valuable insight into the use of country-by-country reporting, based on a report of 26 EU-based banks. Although the reporting criteria is based on the Capital Requirements Directive IV (CRD IV), the interpolations and extrapolations indicate the trend by which such reports could be used, especially when viewed in isolation by recipients in the public domain.
A link to the report is provided for reference:
- The reporting was used to test the hypothesis that profits were overstated in low tax/offshore jurisdictions, with understatement of profits in base country or major operating locations.
- Unitary tax reporting/allocation was used to determine the likelihood that there was base erosion and profit shifting.
- Four methods of assessing profit shifting were used to provide an overall ranking.
- If existing Directive is used, it should be used consistently across all EU jurisdictions.
- Turnover should include intra-group sales with reconciliation to reported group turnover.
- The OECD’s template should be considered as an alternative reporting tool.
- Formulary comparisons are measured and used to reapportion the profits.
This report is indicative of conclusions that may be drawn, although data is incomplete and inconclusive, from a table of reported amounts in various jurisdictions.
Most importantly, the group utilized formulary apportionment to derive an expectation of profit levels among various jurisdictions.
Accordingly, all interested parties should review this report as the OECD is nearing completion of the BEPS Action Plans and CbC reporting.