Washington, DC, 19 July 2013, Global Financial Integrity.

This post was originally published on the Global Financial Integrity website.

OECD’s “BEPS” Report to G20 Fails to Endorse Country-by-Country Reporting for Multinational Companies, a Necessary Precursor to Curtail Corporate Tax Dodging

G20 Should Embrace Disaggregated Accounting Standard

A new report on tackling corporate tax dodging released today from the Organization for Economic Cooperation and Development (OECD) failed to embrace full country-by-country reporting for all multinational companies, eliciting disappointment from Global Financial Integrity (GFI), a Washington, DC-based research and advocacy organization. Grounded in its rigorous economic and legal research, GFI has for years recommended requiring multinational companies to publicly disclose sales, profits made, taxes paid, subsidiaries, and staff levels on a country-by-country basis as a necessary transparency measure to detect and deter abusive tax avoidance.

“While we welcome the international attention being given to corporate tax avoidance, we’re very disappointed in the OECD’s failure to recommend public country-by-country reporting for multinational companies,” said GFI Managing Director Tom Cardamone.

“As recent hearings and articles exposing the profit shifting practices of Apple, Starbucks, and Google highlight, international businesses have been finding creative ways to artificially shift a company’s profits out of the nations in which they were generated and into tax havens. Such behavior starves governments of much needed tax revenue at a time when rich and poor nations alike are struggling to make ends meet. Requiring companies to disclose where they’re operating, where they’re making their profits, and where they’re paying taxes is a straightforward way to detect and deter corporate tax dodging,” added Mr. Cardamone.

The OECD’s Action Plan on Base Erosion and Profit Shifting (BEPS)—presented to the G20 Finance Ministers on Friday ahead of their weekend summit—acknowledges that current international tax standards are flawed, and that they facilitate widespread tax dodging by multinational companies. Still, it fails to recommend simple transparency measures that would tackle the problem.

Global Momentum for Country-by-Country Reporting

Both the European Union and the United States have recently passed legislation requiring companies operating in the extractive industries to report on payments made to all governments, with Canada also announcing its intent to adopt similar rules.

In April, the EU adopted requirements that all financial institutions disclose profits made, taxes paid, subsidiaries, and staff levels on a country-by-country basis, and EU leaders announced in May that they were considering requiring all multinational companies to do the same.

Additionally, while not calling for full, public country-by-country reporting, G8 leaders meeting in Northern Ireland last month stated that “multinationals should report to tax authorities what tax they pay where.”

“Global momentum is clearly moving toward requiring multinationals to publicly report information on a country-by-country basis, and this report underlines the OECD’s position as a laggard in the international tax arena,” noted Mr. Cardamone.

“Hop on the Train or Get Left Behind”

“This weekend, G20 Finance Ministers have the opportunity to build upon progress at last month’s G8 Summit by calling for full, public country-by-country reporting by multinational companies,” continued Mr. Cardamone. “The world is moving ahead on this issue, and it’s time for the G20 and OECD to hop on the train or get left behind.”