US Democratic presidential candidate Sen. Bernie Sanders (I-VT) and three Senate colleagues on June 8 urged the Obama administration to require public disclosure of country-by-country tax reports of large multinational companies.
Sanders, Sen. Al Franken (D-MN), Sen. Sheldon Whitehouse (D-RI), and Sen. Ed Markey (D-MA), in a letter to IRS Commissioner John Koskinen and Treasury Secretary Jacob J. Lew, said proposed US country-by-country reporting regulations, issued last December, will provide the IRS with an important tool in the fight against multinational corporation tax avoidance.
The rules should be extended, though, the Senators said, to allow public assess to the multinational corporation data.
“Unfortunately, in recent years, a number of multi-national corporations have found ways to pay little or no tax in the United States, despite having large operations and a significant portion of their customers in this country. We believe that public country-by-country reporting would be beneficial for policymakers and the public as they consider tax reform or other changes to our nation’s tax policies,” the Senators wrote.
The Senators added that there is “little reason” why a company should not publicly disclose the information as long as safeguards are implemented to avoid disclosure of sensitive business information.
They noted also that European countries currently require banks to publicly disclose country-by-country data, and that an EU proposal for public release of data on all multinationals is now under consideration.
The proposed US country-by-country reporting regulations follow OECD/G20 base erosion profit shifting (BEPS) plan agreements, applying to about 1600–1800 US multinationals that meet a €750 million (USD 850 million) revenue threshold.
The multinationals must annually submit reports to the IRS containing information — such as revenues, profits, income tax paid, stated capital, retained earnings, group tangible assets, and number of employees — relating to every jurisdiction in which the multinational operates.
The reports would be kept hidden from public view, but would be transmitted by the US to tax authorities located in countries where the multinational operates. The US would, in turn, receive country-by-country reports from foreign governments on foreign parented multinationals operating in the US. The scheme is designed to give tax officials information needed to assess the reasonableness of multinationals’ transfer pricing and tax positions.
Separately, at a Washington DC conference sponsored jointly by the OECD and the US Council for International Business, Koskinen today said that the IRS hopes to soon provide more information on how the US will deal with the misaligned start date in the country-by-country reporting regulations.
The US regulations are expected to be finalized June 30, becoming effective for tax years beginning after that date. The OECD’s guidance has an effective that is date is six months earlier though, applying to tax years beginning January 1. Some countries have already implemented the OECD rules and require filing as of the earlier date. At issue is how to handle the gap period.
Under the agreed-to OECD/G20 BEPS scheme, if the US does not collect and share with a foreign jurisdiction the required country-by-country reports, the US multinational must hand the country-by-country report over directly to the foreign jurisdiction, which is something that US companies wish to avoid.
Koskinen said that IRS is attempting to set up a system where MNEs can voluntary file with the IRS during the gap period. The US attempting to confirm with foreign governments that such a voluntary system will resolve the problem, he said.
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