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European Union (EU), Australia and the United Kingdom (in Brexit mode) are pitching for BEPS+ initiative in the realm of tax transparency. This marks a new milestone in enhanced corporate governance. 
They have separately unveiled plans to goad large multinational corporations/enterprises (MNCs/MNEs) to disclose to public a big & complete picture about taxes they pay in different countries. And MNCs in Australia are already queuing up to declare their resolve to write annual ‘taxes paid’ report for public consideration. 
MNCs would also have to disclose certain other information about their operations such as how many persons they employ in each country and their accumulated earnings.
This transparency initiative is bound to enliven public vigil. It would enrich public discourse on aggressive tax planning and tax avoidance resorted to by MNCs – an issue that has been probed, re-probed and analyzed intensely in the West over the last five years. 
As put by Craig Marston of KPMG, “The global tax transparency agenda now appears unstoppable. Australia has embraced this agenda. Fuelled by Australia’s BEPS leadership aspirations, poorly informed Senators and the Panama Papers and other revelations, this agenda will continue to be pushed. Existing norms of taxpayer confidentiality and commercial-in-confidence will continue to be overtaken by the public’s demand for confidence that companies are paying their ‘fair share’.” 
In a 60-page study titled ‘Trends in tax transparency: The story so far…’ released in June 2016, Marston notes: “As more sensitive tax data regarding “household name” companies is made public it will become increasingly important for those companies to explain themselves to their consumers, to the media and to the public at large.”
He adds: “The tax affairs of multinationals are necessarily complex and nuanced – the challenge will be explaining those complexities and nuances in a way that the public will understand and believe.”
The new window of tax transparency was not conceived by Organisation for Economic Co-operation and Development (OECD) and G20, the joint proponents of Base Erosion and Profit Shifting (BEPS) project. It requires countries & country groups like EU to implement its 15 action points (APs). 
Transparency & tax certainty is one of three focal areas of these APs. The other two pivots on which APs revolve are coherence in the domestic & international tax systems and addressing substantive taxation issues. 
BEPS’s AP12 relates to disclosure initiatives in addressing the lack of comprehensive and relevant tax information, while AP13 attempts to check transfer pricing by mandating each MNC to submit Country-by-Country Report (CBCR) to tax authorities. The process for CBCR filing by MNCs has start-off date of January 2016 with flexibility for jurisdictions that need to amend their domestic laws to provide for CBCR.
OECD’s final report AP13 released in October 2015 says: “Tax administrations should also assure taxpayers that the information presented in transfer pricing documentation will remain confidential.”
It is this OECD’s penchant for “confidentiality” that has led EU and others into opting for BEPS+ strategy toward corporate tax transparency. While EU has dubbed its tax transparency initiative as public CBCR, Australia has termed it as tax transparency code (TTC)
The benefits of public CBCR have been articulated in European Commission’s (EC’s) ‘Staff Working Document’ captioned ‘Assessing the potential for further transparency on income tax information with a public CBCR’.
It says: “Limits imposed by the OECD scheme on tax administrations for the use of CBCR would not apply to a public CBCR. Whereas the OECD limits their use to orienting tax audits, it will be up to each tax authority to determine how it reacts to a public CBCR.”
It adds: “The public dimension of the CBCR would add pressure on tax authorities to audit certain MNEs for which CBCR will have shed light on apparently doubtful practices in the public’s eyes. A tax audit is the best tool to determine whether practices are justified.”
EC’s proposal requires large multinational companies to disclose publicly the income tax they pay within EU, country by country. In addition, they would have to reveal how much tax they pay on the business they conduct outside EU.
For their operations in tax havens, MNEs would have to disclose information on a disaggregated basis.
All MNCs with a turnover of more than Euro 750 million each would have to comply with this transparency requirement. Public CBCR would have to be disclosed for every EU country in which a company is active, as well as for tax havens. Each MNC would also have to prepare a global CBCR by aggregating tax paid/not paid in each country.
After its approval by European Parliament and the Council of the EU, public CBCR envisaging amendment to EC’s Accounting Directive (Directive 2013/34/EU) would be incorporated by all EU member states in their respective laws within one year. 
EC’s proposal is a follow-up of the study on ‘aggressive corporate tax planning’ released by European Parliamentary Research Service in September 2015.
The Study titled ‘Bringing transparency, coordination and convergence to corporate tax policies in the European Union’ estimated revenue losses for the EU as a result of corporate tax avoidance/profit shifting in the range of 50-70 billion euro.
As put by the Study, “We think this figure represents a lower-end estimate of lost revenue. If, however, we include other tax regime issues, such as special tax arrangements, inefficiencies in collection and other practices, we estimate that revenue losses for the EU due to corporate tax avoidance could amount to around 160-190 billion euro, again a conservative estimate. We have assessed the corporate income tax efficiency to be 75 per cent. This contrasts with the IMF’s assessment of 86 per cent.”
It reckons that comprehensive solution to BEPS would bring additional revenue of Euro 11.5 billion to EU. 
Unlike EU’s mandatory public CBCR, Australia has left it to MNCs to voluntary embrace its TTC introduced as part of budget for 2016-17. 
 According to Australian Taxation Office (ATO), TTC is a set of principles and minimum standards to guide medium and large businesses on public disclosure of tax information.
The minimum standard of information required under the TTC depends on the size of the business. Information disclosed under the TTC is divided between Part A and Part B content. ATO has recommended that medium businesses adopt Part A of the TTC and large businesses adopt both Part A and Part B of the TTC.
Part A envisages reconciliation of accounting profit to tax expense and to income tax paid or income tax payable; identification of material temporary and non-temporary differences and accounting effective company tax rates for Australian and global operations. Part B, on the other, deals with approach to tax strategy and governance; tax contribution summary for corporate taxes paid and information about international related party dealings.
ATO says: “Businesses may elect to satisfy the minimum standards of the TTC by publishing improved disclosures of tax information in their general purpose financial statements, a Taxes Paid Report or another document. There is no prescribed template or format for TTC content.”
Like EU, the UK has proposed mandatory TTC.
According to Deliotte, the UK Government released revised legislation in March 2016. It will require large businesses to disclose their UK tax strategies publicly. This affects not only UK companies which already fall within the Senior Accounting Officer (SAO) legislation, but also extends to large permanent establishment of overseas companies, large UK partnerships and the UK operations of multinationals groups which breach (or would breach if UK parented) the OECD’s CBCR reporting threshold.
The analysis so far shows that except for public disclosure, there is no uniformity in the content, the reporting format and the compliance norms in TTCs of EU, Australia and the UK.
This underscores the need for standardizing TTC for public disclosure. And this issue was driven well during January 2016 by an Australian entity name Group of 100 (G100). It is an organization of chief financial officers from Australia’s largest business enterprises with the purpose of advancing Australia’s financial competitiveness
Noting that the UK and EU are developing their respective TTCs and many other countries are likely to follow suit, G100 told When Australia’s Board of Taxation that its TTC “should be developed, as far as possible, in conjunction with these other codes. Otherwise multinationals will be subject to multiple levels of disclosure and transparency in different countries.”
Heterogeneity in the TTC formative stage is good. After a couple of years, OECD or G20 should step in to facilitate standardization of TTC for all MNCs and for all countries. 
And while doing so, OECD/G20 should give credit to global mining giant Rio Tinto for blazing trial in tax transparency. It is perhaps the first MNC that started publishing an annual report on taxes it pays globally in 2010, two years before OECD unveiled BEPS project.
Subsequently, a few other companies such as BHP Billiton & BP plc started publishing annual reports similar to Rio Tinto’s ‘Taxes Paid’ report.  
As put by Rio Tinto's Chief Financial Officer Chris Lynch in June 2016, “Rio Tinto believes that transparency makes good business sense.”
Let this belief be imbibed and implemented by each & every corporation, multinational or local.
                                                     
published by taxindiainternational.com on 22nd November 2016 

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