Key Takeaways
- Several senators are proposing a public country-by-country tax reporting system for large companies.
- The proposal is just the latest in many new initiatives to require companies to report more information about their global tax footprints.
- The new requirements raise the risk of mismatching or misleading public tax information.
- OECD reduces revenue estimate from global minimum tax.
- U.N. looks to tax online digital services.
The trend towards tax transparency continues to grow–despite the many concerns that have been raised.
Most recently, several Democratic senators unveiled proposed legislation to require large corporations–with annual revenue at nearly a billion U.S. dollars–to make public country-by-country reports of tax data. These reports, already required confidentially as part of an Organization for Economic Cooperation and Development initiative, include information such as profit, taxes paid, employees and tangible assets, broken down by country for all of the jurisdictions where the company is present.
This isn’t a new idea–several of the senators, such as Maryland Sen. Chris Van Hollen and Massachusetts Sen. Elizabeth Warren, have made similar proposals in the past, including to require such reporting from companies which received pandemic relief in 2020.
But the proposal is being dusted off at a time when the dial is starting to move on this issue. Australia recently enacted the first public country-by-country reporting regime. The Financial Accounting Standards Board, which sets U.S. accounting standards required by the Securities and Exchange Commission, now requires companies to include some country-specific tax data in public filings.
Officials from the U.S. Department of the Treasury, as well as OECD Director of Tax Policy Manal Corwin, have raised concerns that the reports could paint a misleading picture. In theory, the reports could unveil situations where companies have shifted income to low-tax jurisdictions–if there is a country where they report high profits but low taxes and few employees in the same country, for instance. Those statistics could also be influenced by double counting or timing mismatches, critics note.
Industry groups continue to push back on the trend. It’s possible, however, that more tax transparency is inevitable–and there could be a choice between full transparency or a piecemeal approach.
Right now, FASB requires companies to report taxes paid in foreign jurisdictions if those payments reach a certain threshold, and to provide explanations for how those jurisdictions affected its overall tax rate. That covers some of the OECD’s country-by-country categories, but not all. The European Union enacted a reporting regime that requires companies to report tax information for certain countries (such as EU members and jurisdictions designated as tax havens), while aggregating foreign data for others. The EU also has reporting requirements for extractive industries like fossil fuels and logging, as part of a longstanding global anti-corruption initiative. But those requirements focus mostly on disclosure of taxes paid, rather than income.
These mismatched reporting requirements could make it even harder for companies to explain their tax positions–and could make some wonder if a full transparency regime isn’t a better option.
Noteworthy Items This Week
Taxpayers in scope of the global anti-base-erosion rules faced their first major filing deadline June 30, with several jurisdictions requiring them to submit GLOBE information returns (GIRs) and other key filings.
Many taxpayers started getting ready for the deadline well in advance, digging up troves of data to fill out the complex GIRs and setting up their compliance teams. Some used third-party software to prepare and submit returns, while others worked with tax advisory firms.
Global Minimum Tax Estimates Take Hit From US Company Carve-out – Lauren Vella, Bloomberg Tax ($):
The Organization for Economic Cooperation and Development estimated that global tax revenues would increase by 3.2% to 5.4%, or $91 billion to $155 billion annually, according to a virtual presentation hosted by OECD officials Wednesday.
The new estimates come after the OECD reported countries brought in less revenue than initially projected in the first year of the tax’s implementation. An earlier impact assessment conducted in January 2024 found revenue gains were estimated between $155 billion and $192 billion annually.
U.N. Tax Convention Protocol to Cover Automated Digital Services – Sarah Paez, Tax Notes ($):
The draft protocol, published July 20, would cover individual, company, or group income from cross-border services — encompassing fees for services, automated digital services, and insurance premiums — where the income is from a resident of one of the signatories to the protocol.
U.N. delegates are set to discuss the draft protocol on the taxation of cross-border services and a second draft protocol on dispute prevention and resolution — also released July 20 — at their next meeting in New York August 3-14. They have been engaged in intensive negotiations over the last year and a half to produce a U.N. framework convention on international tax cooperation and two early protocols by the second half of 2027.
EU Countries Split On Pillar 2 Multinationals' Reporting Breaks – Eleanor Butler, Law360 Tax Authority ($):
The DAC6 carveout, proposed by the commission to simplify reporting obligations for businesses, proved controversial during a meeting of member states Thursday, according to the officials, who requested anonymity.
Pillar 2 refers to a global framework led by the Organization for Economic Cooperation and Development that imposes a 15% minimum tax on multinationals with annual consolidated revenues of more than €750 million ($857 million).
As the deadline approaches, the Trump administration has indicated that it plans to use Section 301 of the same act to replace those tariffs with more durable and roughly equivalent ones based on accusations concerning forced labor. Imports from Brazil have been singled out for 301 tariffs amounting to 25%, though many consumer goods such as coffee and beef are exempted. The administration is also laying the groundwork for possible additional Section 301 levies with an investigation into concerns that 16 major trading partners maintain excess manufacturing capacity. And it plans to expand so-called sectoral tariffs, which are imposed on specific product categories.
Public Domain Superhero of the Week
Every week, a new character from the Golden Age of Comics, who’s fallen out of use.
This week’s entry: Atoman
Debut Year: 1946
Debut Publication: Atoman #1
Origin Story: Through gradual exposure to nuclear materials while working in a lab, he gained "the power of the atom."
Superpowers: Flight, super-strength, "atomic vision," and the ability to weld metal with his hands.
Eide Bailly's International Tax Team and our affiliates at HLB, The Global Advisory and Accounting Network, stand ready to assist with your worldwide tax needs.
