US Senate Finance Committee Chairman Orrin Hatch (R-UT) and House Ways and Means Chairman Paul Ryan (R-WI) today sent a letter to Treasury Secretary Jack Lew raising concerns about transfer pricing documentation requirements in the OECD/G20 base erosion and profit shifting (BEPS) plan and calling on the administration to consult with Congress before it stakes out positions on the BEPS plan.
The tax-writing committee chairs said they are troubled that Treasury has agreed to transfer pricing documentation rules that would give foreign governments access to sensitive information about US multinational operations through country-by-country (CbC) reporting and through a master file.
“The master file contains information well beyond what could be obtained in public filings and that is even more sensitive for privately-held multinational companies,” Hatch and Ryan state.
The lawmakers said it is “questionable” whether the IRS and Treasury have authority to write rules implementing CbC reporting, and asked for a legal memo explaining the government’s authority to do so, how the information obtained by the IRS on foreign multinationals operating in the US would be used, and the justification for agreeing that sensitive master file information on US multinationals can be collected directly by foreign governments.
“In the event we do not receive such information, Congress will consider whether to take action to prevent the collection of the CbC and master file information,” the lawmakers said.
Hatch and Ryan also expressed concern about the BEPS interest-deductibility limitation proposal, stating it is based on “questionable empirics and metrics.” They also said they questioned BEPS proposals to modify the permanent establishment rules, use general anti-abuse rules in tax treaties, and collect sensitive data from US companies to analyze and measure BEPS.
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