Country‐by‐Country Reporting: The New OECD Guidelines and IRS Final Regulations

• DOI: http://doi.org/10.1002/jcaf.22271
• Published date: 01 May 2017
• Date: 01 May 2017

38

© 2017 Wiley Periodicals, Inc.

Published online in Wiley Online Library (wileyonlinelibrary.com).

DOI 10.1002/jcaf.22271

f

e

a

t

u

r

e

a

r

t

i

c

l

e

Country-by-Country Reporting:

The New OECD Guidelines and

IRS Final Regulations

Roger Y. W. Tang and Thomas D. Schultz

The Organisation

for Economic

Co-operation

and Development

(OECD) and the

Group of Twenty

(G20) countries

established the Base

Erosion and Profit

Shifting (BEPS)

project to address

concerns regarding

the ability of multi-

national enterprises

(MNEs) to engage

in tax avoidance by

exploiting gaps in

international tax

rules. When MNEs

structure advanta-

geous transfer pricing arrange-

ments and other strategies to

artificially shift the recognition

of profits to relatively low-tax

or no-tax jurisdictions, the

result is a misalignment of the

incidence of taxation and the

true source of value creation.

The BEPS project helps global

tax authorities by providing an

inclusive framework and the

tools necessary for measuring

and taxing profits in the loca-

tions where economic activities

occur.

After its initial BEPS

report was released in 2013,

the OECD and G20 countries

adopted a 15-point action plan

to guide future international tax

administration efforts (OECD,

2013a, 2013b). Specifically,

Action 13 provided

revised standards

for transfer pric-

ing documentation

and a template for

country-by-country

(CbC) reporting

of revenues, prof-

its, taxes paid, and

other measures of

key economic activi-

ties (OECD, 2014).

Since delivering

this guidance, all

OECD members

and G20 countries

have worked with

developing countries,

the European Com-

mission, and many

other international stakehold-

ers (including the International

Monetary Fund, the World

Bank, and the United Nations)

to develop a 2015 final report

for each of the 15 action plans

(OECD, 2015a).

The final report on Action

13 released in October 2015

contains revised standards

for MNE transfer pricing

Because transfer pricing strategies can artifi-

cially shift the recognition of business profits to

relatively low-tax or no-tax jurisdictions, global

tax authorities find it challenging to fairly and

consistently measure the economic value created

by multinational enterprises in a given country.

Action 13 of the OECD/G20 Base Erosion and Profit

Shifting Project provides an inclusive framework to

address these challenges including a template for

annual country-by-country reporting of revenues,

profits, and taxes paid. In the United States, final

regulations have established the reporting require-

ments for U.S. multinational enterprise groups for

taxable years beginning on or after June 30,

2016, when annual revenues exceed $850 million.

© 2017 Wiley Periodicals, Inc.

Editorial Review