The OECD discussed country-by-country reporting in Paris this morning. I was invited to present but because of my health at the time I was asked to go had to decline, but my place was more than ably covered by others.
Business has fought back heavily against country-by-country reporting (PWC asked today that the amount of information disclosed be cut so radically that only a hollow gesture would remain) but the reality is the latest OECD draft (not yet published, but which I have) on the issue is better than I expected: not ideal, and with some real weaknesses (data does not need to be reconciled to consolidated accounts, for example, and the entities covered need not even be the same) but there are real wins.
The first is that small countries are not excluded - a demand business made and which would leave tax havens out (very conveniently for them).
Second, there is no materiality concept.
Third, intra-group transactions are required to be disclosed and they are reasonably defined.
Fourth, as I begged for, tax is not now just cash paid but also the accrual for the current year.
Fifth, the approach to permanent establishments is sound.
Sixth, the local results have to be consolidated by country - as I was sure was needed.
These are all good. The weaknesses are that local accounting standards can be used and so arbitrage opportunities between accounting systems will remain and not be highlighrted and insufficient payroll data will be supplied. But overall what has gone from the first draft I can broadly live with.
The outcome is not ideal, but takes us a long way forward. That's how change happens. As my BEPS Monitoring Group colleague, Prof Sol Picciotto, who is in Paris tweeted this morning:
I think he may be right.
And, what is more, Sol made a powerful case today for the data to be on public record. It will happen.
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Wonderful , important work you’re all doing. Hope to see you back in the fray soon. Good luck to Sol.
inspiring stuff! get so used to hearing about governments and regulators pandering to big business that it starts to feel inevitable that they’ll have things all their own way. then you read something like this and it gives hope for the rest of us. nice one!
More power to your hand Richard et al., a possible step forwards which will have a few corporate treasury departments squealing or at least head scratching… which is nice.
Is any of this enforceable though? Am interested as to whether OECD recommendations are enforceable under any legal system
OECD guidelines tend to become law
That’s the best I can say
Mr Murphy –
Decisions taken by the OECD are of no relevance without legislation passed by the United States Congress. Senator Levin introduced country-by-country reporting for companies listed on US stock exchanges as part of the Stop Tax Haven Abuse Act (S. 1533). The Act has no bi-partisan support in the Senate (it was introduced by four Democrats). It would obviously stand no chance in the House.
As with all other matters, country-by-country can obviously not succeed without the support and participation of the United States, which represent about a third of tradable global economic output and over sixty percent of financial services.
You are wrong
The US can do what if likes
So too can every other country – and can demand this data whether the US does or not
I have no trouble with Country by Country Reporting as a concept.But I have forgotten what will be the practical benefits. Presumably there will be “winners and losers”
if only in the Corporate Responsibility stakes, but as I have said before I just cannot see how it will be policed. If any multi national is potentially coming out as a loser, they have such resources to call a lemon an apple, and the whole purpose is going to be downgraded.