U.S. Treasury, IRS Move Quickly to Implement OECD BEPS Agreement, Finalizing Rule Requiring Country-by-Country Reporting by Multinationals
U.S. Companies Will Be Required to Disclose Relevant Financial Data on Country-by-Country Basis to Tax Authorities but not to Public
WASHINGTON, DC – Today the U.S. Treasury and the Internal Revenue Service (IRS) published a rule, which will become final tomorrow, requiring the U.S. parent company of large, public and privately held multinational companies to provide certain financial data to the IRS on a country-by-country basis. The information is meant to provide tax authorities with better tools to identify where a company might be artificially shifting profits into tax havens—a red flag for tax evasion and tax avoidance that may warrant further investigation.
The new rule implements the U.S. commitment to adopt country-by-country reporting as agreed among the U.S and other OECD countries last year. While U.S. multinational companies will report the financial information to the IRS, the U.S. government will also make the information available to the tax authorities in other countries where the multinational company has subsidiaries through a series of bilateral agreements.
Although the IRS failed to heed calls by Global Financial Integrity (GFI) and over 100 other members of the Financial Accountability and Corporate Transparency (FACT) Coalition to make such information public, the swift implementation of the new international standards will give tax authorities powerful new tools in the prevention of economically harmful tax avoidance by multinationals.
“Treasury and the IRS should be lauded for wasting no time implementing rules to meet our international obligations and take the next crucial step in efforts to address the damaging effects of tax evasion and avoidance,” stated Heather Lowe, Legal Counsel & Director of Government Affairs for GFI, who organized FACT’s comment on the proposed rule submitted earlier this year. “We’re pleased that the IRS heeded calls by civil society to remove the proposed national security exception from the final rule. However, by failing to make the information public, the IRS dismissed strong arguments that Congress should have access to the information to ensure they are crafting effective tax laws as they look to reform the U.S. tax code. Furthermore, researchers, journalists, and concerned citizens could have been instrumental in analyzing the information and generating alternative policy recommendations to help the U.S., and other governments, grapple with the serious problems of global tax evasion and avoidance and their negative impact on poverty and inequality worldwide.”
GFI President Raymond Baker added that, “The United States should be pushing the envelope on corporate transparency standards instead of being carried by the international tide. The rule is an encouraging first step but begs the question, how long will it take us to get where we need to be?”