In my previous posts, I outlined the two initial steps to preparing for CbC reporting requirements. The third a proactive approach to global risk management.
Prepare for Global Risk Management - Multinational corporations (MNC) should anticipate and prepare for the possibility that their CbC report will become publicly available. While this has been an ongoing concern of multinationals, recent announcements by the UK indicate its intention to support public disclosure. In its Business Tax Roadmap published March 17, 2016 HM Treasury noted "The government believes there is an opportunity to go beyond the outcomes of the BEPS project and enhance transparency over multinationals' tax affairs by requiring them to make the details of tax paid publicly available on a country-by-country basis. The UK will therefore press the case for public country-by-country reporting on a multilateral basis." To the extent a CbC reporting template shows high levels of profit in low or no tax jurisdictions, multinationals face increased reputational risk from NGO’s and the press who could question their tax practices.
Multinationals should also begin to staff up for the increased compliance workload associated with filing the CbC reporting template, as well as anticipated increases in tax controversy stemming from the new disclosure of a company’s global allocations of profits and taxes paid in the report. In addition, BEPS-like unilateral action is already being taken today by countries and their auditors. With inadequate dispute resolution capabilities and practices, such tax disputes could very likely lead to double, or even triple taxation.
CEO’s are advised to have proactive conversations with their tax executives to assess the potential impact and risks associated with public disclosure of the template and potential increase in tax disputes.
Please remember that the Tax Matters provides information for educational purposes, not specific tax or legal advice. Always consult a qualified tax or legal advisor before taking any action based on this information.
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Bob Norton, Specialist Leader at Deloitte, was formerly Chief Income Tax Officer in the Chief Tax Office (CTO) of Vertex, Inc. Bob has more than 30 years of corporate tax, accounting and technology experience from both public accounting and global industry. Prior to working at Vertex, Bob held several senior financial management positions running global tax, treasury, and merger and acquisition functions for Siemens' Medical IT division. Bob is a noted author and speaker and sits on the Editorial Advisory Board of Financial Executives magazine and is a member of FEI, the Tax Council, AICPA, PICPA, and the Association for Computers and Taxation. He is a CPA and received a B.S. in Accounting from the Pennsylvania State University and an M.S. in Taxation with honors from Villanova University.