March 22, 2016
Heather Lowe, +1 202 293 0740 ext. 228
U.S. Companies Would be Required to Disclose Relevant Financial Data on Country-by-Country Basis to Tax Authorities
WASHINGTON, DC – Global Financial Integrity (GFI) and over 100 other members of the Financial Accountability and Corporate Transparency (FACT) Coalition have submitted a letter to the U.S. Department of the Treasury (Treasury) and to the Internal Revenue Service (IRS) urging them to maintain and strengthen a proposed rule on Country-by-Country Reporting that would bring much needed transparency to how U.S.-based companies book profits and pay taxes in many of the countries in which they have subsidiaries. The proposed rule is meant to give the IRS and, potentially, foreign tax authorities, a window into how multinational companies may be gaming the international tax system and avoiding taxation in the U.S. and other countries. Today is the final day to submit public comments to Treasury and the IRS on the proposed rulemaking.
In line with commitments the United States has made to its OECD and G20 partners, in December the IRS and Treasury proposed a regulation that would require 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 taxable profits into tax havens—a red flag for tax avoidance warranting further investigation.
“We are extremely pleased to see that the Government is moving swiftly to implement this international commitment, but we’re concerned that Congress will be unable to access the data, which will really frustrate the intent of having this additional transparency,” stated Heather Lowe Legal Counsel & Director of Government Affairs for GFI, who organized FACT’s letter. “The IRS is treating the new form that large multinational companies will have to file as tax information, which means that it will be shielded from the public and even Congressional view by a high level of confidentiality. However the information captured on the form is simply a disaggregated version of information already publicly available for many companies on their SEC filings. Congress must be able to access this information to analyze it and propose the kind of tax reforms necessary to stop corporate tax dodging for good.”
The FACT Coalition’s comment letter also recommends that the reporting include a larger percentage of the corporate group than what has been proposed, and that the basic financial information required by the form be made publicly available.
Other recommendations include the addition of two new columns on the form—one for offshore income on which the company is deferring taxes and another to capture the company’s reserves for “uncertain tax positions.” These are important pieces of information that are unique to American corporate tax planning and would go a long way to helping the government understand how corporations may be engaging in aggressive profit-shifting.
GFI President Raymond Baker added that, “This rulemaking is an unprecedented opportunity to finally bring transparency to one of the most economically damaging practices that multinational companies engage in. The U.S. has lost billions in corporate tax revenue from this kind of activity, and developing countries lose even more. This proposed regulation is a start, but the Government needs to make their international commitment to tax transparency real by publishing a stronger rule that puts the information in the hands of the people, or at least the people they have elected.”
For all press inquiries or to schedule an interview with Ms. Lowe, contact Christine Clough firstname.lastname@example.org / +1 202 293 0740, ext. 231. On-camera spokespersons are available in Washington, DC.
Notes to Editors
Click here to access other comment letters that have been submitted and the language of the proposed rule.