Public CBCR is only one initiative that answers calls to increase tax transparency. With transparency regulations nearing a tipping point, multinationals are advised to kick initiatives into gear in order to improve the maturity and transformation of their in-house tax function.
As a consequence of the existing OECD Base Erosion and Profit Shifting (BEPS) program launched nearly a decade ago, multinationals are required since 2016 to draft and file annually the so-called Country-by-Country Reports (CBCR). These CBCR include key global financial and tax metrics of the multinational company which are aggregated at country level and support the tax authorities’ ability to perform risk analysis.
Responding to the rising calls for greater tax transparency, the EU Commission already proposed back in 2016 to make these CBCR available publicly, with a view to provide stakeholders more insight in how multinationals are dealing with their tax affairs (so-called Public CBCR). In particular, insight is meant to be revealed regarding “what taxes are being paid, and where”. For a long period, this initiative was blocked by certain EU member states.
Until early 2021, when a breakthrough was achieved that pushed the initiative further in the legislative process. At the end of September, another milestone was reached, and it is expected that a final approval will be reached as early as October or November 2021. From the point of this hypothetical approval, an 18 months implementation deadline for the EU member states would come into force. More details can be found here.
Public CBCR is only one initiative that answers calls to increase tax transparency. In parallel, the EU is also working towards a public Effective Tax Rate reporting. Many more initiatives are being launched across the world. The US, for example, are working towards increased transparency around taxes paid by corporations. Clearly, responding to the additional compliance requirements brought on by these many initiatives can be expected to bring about a completely new level of pressure on multinational companies and their in-house tax teams.
Taxes are acknowledged by the UN to play a vital role in achieving the Sustainable Development Goals. In furtherance thereof, among others the Global Reporting Standard GRI-207 and the B-Team Responsible Tax Principles have prompted best in class companies to act proactively and voluntarily disclose information about taxes already today. Intentions alone don’t make being transparent about taxes an easy thing to do. Transparency requires a certain state of maturity and preparedness, as the public nature of the disclosures brings pressure to make sure that what is disclosed is correct and accurate. With transparency regulation nearing a tipping point, multinationals are advised to kick initiatives into gear in order to improve the maturity and transformation of their in-house tax function.
Loc.tax enables in-house tax teams to achieve higher levels of maturity and preparedness. Its collaborative Tax Orchestration Platform guarantees a holistic control of all tax operations and processes around the globe, pragmatically driving preparedness for increased transparency requirements. If you want to learn more, feel free to reach out to us (email@example.com) or book a demo.
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Key in this new release is our DAC6 app. With DAC6 EU Directive rules now live and reporting applicable since 1 July 2020, companies and intermediaries are required to report certain potentially tax-aggressive cross-border arrangements to the tax authorities. Arrangements in scope will need to be reported in a timely manner to avoid penalties which can be extremely high.