A critical analysis of public disclosure of OECD country-by-country reporting

Abstract

Base Erosion and Profit Shifting (BEPS), tax transparency and public disclosure of company information have been contentious topics for world organisations and tax administrators globally for some time now. The discussions became more intense post the 2008 economic melt-down which started to see governments, in particular in the western world, take practical action to curb the flow of income to tax jurisdictions with lower tax rates. The European Union (EU) and the United States (US) governments drafted legislation to compel companies, especially large multinational enterprises, to start disclosing information, particularly tax related information, publicly for the benefit of the investors, governments and the public at large. This was the case with the Dodd- Frank Act in the US and the EU Article 89 of the Capital Requirement Directive in Europe. BEPS has been topical for years and took centre stage in 2015 when the country members of the Organisation of Economic Cooperation and Development (OECD) in 2015 agreed to implement the 15 part action plan to combat profit shifting caused mainly by the loopholes found in international tax law. One of the BEPS action plans relates to increased tax transparency and the disclosure of tax information relating to transfer pricing. The BEPS action 13 Country-by-Country report is currently only disclosed privately to tax administrators. There are strong arguments to have improved transparency. Like the EU Country-by-Country report for banks and the Dodd- Frank Act disclosure for MNEs, the report should be publicly disclosed. This study explores whether there are additional benefits of public disclosure of tax information in light of the profit shifting and tax avoidance goals in place.