EY’s recent publication takes a close-up view of transparency and disclosure trends, including a detailed analysis of several countries’ latest trends. A link to the report is provided for reference:
Transparency issues of the future:
Country-by-Country (CbC) implementation and inconsistency of approaches
New transfer pricing documentation requirements
Public access for CbC reports and tax rulings
Growing trend to disclose a company’s planning, strategy, risk appetites and effective tax rates
Tax codes of conduct, formal and informal
Increased disclosure of aggressive tax positions
Electronic data gathering
Use of third-party data
Direct ERP access
Matching of data and watching for transactional trends
EU transparency update, including proposed Directives
Country transparency updates: Argentina, Australia, Brazil, China, Denmark, Ecuador, France, Germany, Greece, Mexico, Netherlands, Poland, Singapore, South Africa, South Korea, Spain, UK, US
The level of future transparency will continue to increase, with new and dissimilar demands by countries around the world. This report unveils the global trends and issues, with comprehensive analyses of various transparency trends of major countries. Accordingly, it is a publication that should be reviewed to better understand where the current trends are requiring future demands for transparency in a new world of international taxation.
Country-by-country tax reporting (CbCR) should be publicly disclosed to fight tax evasion and avoidance.
Perceived benefits of public disclosures include better tax justice and an end to tax havens.
All countries should adopt CbCR.
Company ownership should be in the public domain.
EU institutions should monitor actions by the Member States to determine ongoing funding decisions.
The EU continues to be a proactive force in introducing public disclosure changes, which will be a spark for all other countries to follow. Accordingly, monitoring such activities will be a key to understanding future trends and disclosures that can be planned for currently.
The European Commission, in its meeting on 27 May 2015, determined that a new Action Plan is needed to address tax abuse and ensure sustainable fisc growth by the Member States. This follows its proposals on the Tax Transparency Package, including automatic exchange of tax rulings, possible public tax disclosure, and a review of the Code of Conduct.
The new Action Plan will look at integrating BEPS actions within the EU, review the digitalized economy, relaunching the Common Consolidated Corporate Tax Base (CCCTB) initiative and further rules for increased transparency.
The KPMG Euro Tax Flash provides a summary of the new proposals.
It is noteworthy that the EU is proceeding on designed actions in anticipation of, and subsequent to, BEPS actions for the EU Member States. These actions may form a new set of rules similar to, as well as disparate from, the new OECD Guidelines and the rest of the world. Other countries will be following these initiatives for similar adoption at a unilateral level, thereby providing a complex multi-layering of anti-abuse rules, transparency initiatives, and tax bases.
The answers to the struggle for fostering a better business environment in the EU market may be much different from an EU and rest of world perspective.
Australia has enacted tax return disclosures into law via amendments referenced in Schedule 5, Tax secrecy and transparency. The Commissioner must, as soon as practicable after the end of the income year, make publicly available the following information for corporate tax entities with reported total income of $100 million or more, according to information reported in the entity’s tax return:
Total income for the income year
Taxable income or net income (if any) for the income year
Income tax payable (if any)
All multinationals should develop an action plan, if not already in place, outlining the method by which tax return disclosures are to be reported in Australia and other countries around the world. The methodology should be aligned with the CFO, Board of Directors and senior leaders of the business.
The tax return information chosen for disclosure will not provide reasons why there may be significant differences between total income, taxable income and the resulting income tax payable (if any), and will likely provide a forum for public scrutiny and questions surrounding noted variances.
Accordingly, critical decisions re: additional voluntary disclosures, responses to questions generated by the disclosures, and other relevant factors should be considered within the context of the global Tax Risk Framework. Valuable information can be obtained from tax disclosures of the extractive industries, including the impact of indirect taxes and non-tax contributions.
Tax transparency is a rapidly growing trend for which global strategies and Best Practices should be adopted to timely address current and future developments.