Country-By-Country Reporting / Corporate tax transparency
On 12 April 2016, the EC issued its proposal to amend the Accounting Directive (Directive 2013/34/EU). When in force multinationals with consolidated annual revenues of €750 million or more are obliged to publish CbC information on their websites for its operations in EU member states and identified tax havens.
During a April 2016 meeting to discuss the EC Anti-Tax Avoidance Package, several EU finance ministers said that the EC proposals should not go beyond the OECD BEPS project recommendations.
With the rules on country-by-country reporting, the EU has created a framework where businesses in the extractive and logging industries have to publish their payments to governments relating to the exploitation of natural resources. This will assist populations of resource-rich countries to hold their governments accountable for these proceeds.
In addition, a country-by-country reporting is also required from EU credit institutions (banks). This will ensure that trust in the financial sector is regained.
Requires banks and investment firms to publicly disclose certain information for every country where they operate (type of activities, turnover, full-time employees, profit/loss before tax, tax paid, public subsidies received).
On 12 April 2016, the Commission adopted a proposal for a Directive which imposes on EU and non-EU multinational groups the publication of a yearly report on the profit and tax paid and other information (Accounting Directive separate initiative from OECD).
Disclose reports on income tax information, including a breakdown of profits, revenues, taxes and employees reported separately for each Member State. Such reporting obligations will when the proposal comes into force be applicable for EU and non-EU MNEs that do business in the European Union.
Executive Summary (See above)
Synopsis report on the consultation activities
Text of the proposal
Embrace new technologies and catch up: automate workflow, document management, calendaring and internal controls
Compliant tax software solutions for the global management of tax processes
In essence, HRMC’s increases its expectations towards large businesses with regard to a more and more transparent tax management strategy. However, the publication of a tax strategy will clearly not be sufficient. It is just the starting point for the provision of a clear picture about the risk management and controls in place of tax relevant processes. The daily management turns on the radar.
State-of-the-art tax compliance management software is required.
In difference hereto, the view into the current daily practice provides a different and non-compliant picture:
Widespread use of Excel spreadsheets, decentralized storage of tax relevant documents, lack of documented controls, lack of automation, global lack of tax compliance software tracking individual changes and filings, lack of standardized reports immediately available upon request, lack of in-built double-checks for the calculation of current and deferred taxes on reporting entity level, lots of tax relevant data stored at external outsourcers (e.g. external tax advisors and accounting firms), several tax software tools in place at various locations which are neither interfaced among each other and with the ERP systems in place, etc.
It is obvious that tax departments which are not adapting its process management to the requirements addressed by HMRC and other tax authorities may struggle with regard to compliance, efficiency and transparency.
Therefore, compliant tax software solutions for integrated tax management like the U² software from Universal Units become more and more important
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Related GITM articles
- Examples of public Fiscal Transparency statements
- The Tax Transparency Benchmark 2015
- BEPS 2015 Final Reports
- EU - Public consultation on further corporate tax transparency
- CbC reporting / tax transparency: Accounting Directive
- Improving large business compliance
- Tax administration: large businesses transparency strategy
- Spreadsheets and Compliance
- Tax Strategic Plan
- Tax Control Framework