It's not often I reproduce a KPMG press release, but this one is worth noting:

Taxing authorities seeking to enforce transfer pricing regulations are considering a broader range of company transactions that can result in more detailed investigations, according to a new publication from KPMG International.

Among the "red flags" now seen by tax authorities worldwide as possible reasons to investigate further are:

• unusually high profits or losses in a group company,
• corporate restructurings involving closures or reductions in operations,
• significant inter-company management fees,
• dealings with a group company in a tax haven, and
• location in a low cost country.

These are among the instances of tightening regulations discussed in "A Meeting of Minds - Resolving Transfer Pricing Controversies," a publication that focuses on transfer pricing controversy issues and resolution alternatives which incorporates contributions from 39 KPMG authors from 19 countries.

Perhaps the most immediate reaction is "and you didn't know that already?" My guess is, they didn't.

There is however a mechanism that is already available that could be implemented that would massively increase the chance of tax authorities identifying abuse, and which at the same time provides a structure for companies to both prove they are not transfer price abusing, are not using tax havens, are allocating profits fairly and are as a result of good corporate citizens. That is country by country reporting.

The original idea is highlighted in this paper but it has developed a bit since then. What we are asking for is that each MNC disclose in its annual financial statements:

1. The name of each country in which countries it operates;
2. The names of all its companies trading in each country in which it operates;
3. What its financial performance is in every country in which it operates, including:
- Its sales, both third party and with other group companies;
- Purchases, split in the same way;
- Labour costs and employee numbers;
- Financing costs split between those paid to third parties and to other group members;
- Its pre-tax profit;
4. How much it pays in tax and other ways to the government of the country in which it is operating as a consequence (split as noted in more detail below);
5. Details of the cost and net book value of its physical fixed assets located in each country;
6. Details of its gross and net assets in total for each country in which operates.

Tax information is to be analysed by country in more depth requiring disclosure of the following for each country in which the corporation operates:

1. The tax charge for the year split between current and deferred tax;
2. The liability for other taxes or equivalent charges due to the government of the country for which the report is being made arising in the period;
3. The actual payments made to the government of the country and its agencies for tax and equivalent charges in the period;
4. The liabilities (and assets, if relevant) owing for tax and equivalent charges at the beginning and end of each accounting period;
5. Deferred taxation liabilities for the country at the start and close of each accounting period.

This disclosure would have the inevitable consequences:

a) transparency of group structures would increase;

b) use of tax havens would decrease;

c) transfer pricing abuse would reduce because obvious disparities in profit rates would be apparent;

d) conduit structures which trade almost entirely on the intragroup basis and are usually located in tax havens would become incredibly obvious;

e) the use and abuse of group financing structures would become clear;

f) locations where profit is high that employment incredibly low would be obvious (this is commonplace in Ireland, by the way);

g) compliance with local tax regimes will become more apparent, and location is being used for tax deferral would become obvious.

But the benefits are much more than that. The FT has this morning reported that:

Private equity groups are taking big legal and financial risks as they invest more in emerging markets to escape the US and European credit crunch, buy-out executives and lawyers warn.

Peter O'Driscoll, a lawyer at Orrick in London, said: "Expropriation of foreign-owned assets is on the rise. Not surprisingly, when an investment has done well, local partners have a greater incentive to try to steal it."

The geopolitical risks of many groups are similarly high. Just look at the problems BP has encountered. The potential impact of this risk can only be assessed if data is reported on a country by country basis. Shareholders win as a result.

Country by country reporting is essential to good corporate social responsibility accounting because you cannot be responsible to a community if it is not even known that you are there.

Country by country reporting massively reduces tax risk for states and for corporations. It will create a level playing field where those companies that want to the tax compliant get the benefit from being so.

But let's also remember that country by country reporting is of perhaps greatest benefit of shareholders: their risk is substantially reduced as a result of it, and that has to be good news.

Thankfully, people are noticing. This topic now on a lot of agendas.