German Federal Assembly wary of public release of country-by-country transfer pricing reports on multinationals

by Ninja-Antonia Reggelin

The German Federal Assembly (Bundesrat) on April 12 passed a resolution on a controversial EU proposal for public country-by-country reporting by multinationals, revealing significant concerns about the initiative.

The EU Commission proposal, issued April 12, would amend the EU Accounting Directive. It goes beyond a January 26 proposal that calls for amendment of the EU Council Directive on Administrative Cooperation (DAC IV) to adopt exchange of country-by-country reports among tax officials in accordance with OECD/G20 base erosion profit shifting (BEPS) plan agreements.

The Assembly said that the affected companies have interests worth protecting, which would need to be considered and safeguarded in an appropriate manner. Especially business secrets needed to be protected, the legislative body said.

The Assembly highlighted the issue of two parallel country-by-country-reporting initiatives. The international implementation of the OECD/G20 BEPS approach should have priority, the Assembly said. Therein, the German government was asked to ensure that the EU proposal for public release of the reports would not undermine or weaken the proposal for exchange of country-by-country reports among tax officials.

The Federal Assembly also requested that the German government advocate the following changes to the directive vis-a-vis the European Commission:

  • Businesses should only have to fulfill appropriate reporting obligations and only obligations they are able to comply with. This should especially apply to reporting requirements of subsidiaries and branches with parent entities outside the EU.
  • Both public and non-public country-by-country-reporting instruments should be streamlined in terms of contents to keep the additional administrative burden of affected companies as low as possible.

Interestingly, the initial recommendation of the Finance Committee to the Federal Assembly was far more supportive of public country-by-country reporting: it welcomed the European initiative as an addition to non-public country-by-country reporting, stating that disclosure could be a helpful instrument to combat BEPS.

The Finance Committee said that publication would meaningfully complement country-by-country-reporting because companies would stop engaging in tax avoidance to protect their reputations and because public debate would be enabled, strengthening the public’s trust in the transparency and fairness of the tax systems. The Committee’s draft also said the OECD should consider extending the international standard to require public reporting.

The Assembly’s resolution clearly shows Germany’s reluctance to approve full public disclosure of country-by-country reports. This was also confirmed during the Anti-Corruption Summit held in London May 12. Germany was famously absent of the commitment of 12 countries supporting a global commitment for large MNEs to publicly disclose tax information on a country-by-country basis. Afghanistan, Australia, France, Georgia, India, Italy, Mexico, NL, Nigeria, Russia, Spain, and UK expressed support.

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Ninja-Antonia Reggelin

Ninja-Antonia Reggelin

Ninja-Antonia Reggelin is based in Berlin, where she is head of tax policy at a business association.

She previously worked at the OECD, contributing to the project that led to the publication of the BEPS Action Plan. Prior to that, she was with PwC Germany, where she focused on international tax structuring.

Ninja holds a Master’s degree (LL.M.) in International Trade Law from Bond University Australia and a Master’s degree (M.A.) in International Relations from the University of Kent Brussels School of International Studies.

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