Manal Corwin is national leader of the International Tax practice of KPMG LLP and principal in charge of International Tax Policy in the firm’s Washington National Tax practice. She is also the former deputy assistant secretary for International Tax Affairs in the Office of Tax Policy at the U.S. Department of the Treasury. While at Treasury, Corwin served as U.S. delegate and vice chair to the OECD’s Committee on Fiscal Affairs and was actively engaged in the early stages of the BEPS initiative. Ms. Corwin answered the following questions for Checkpoint BEPS Global Currents on May 11, 2016 regarding the OECD BEPS project:
Q: Are your clients generally taking a wait-and-see approach for the U.S. to finalize its CbC reporting regulations this June before they feel the need to begin preparing and performing TP documentation testing? If so, what are their general reasons for doing so?
A: The majority of our clients are not waiting for the U.S. Treasury to finalize the CbC reporting regulations to begin preparing for compliance. As the basic outlines of the requirements are not likely to change, companies are determining the location and access to data in their systems that will be necessary to complete the report, evaluating the technology or systems enhancements they will need to make to be able to complete the report, performing dry runs with data they have to look for gaps or inaccuracies, and evaluating the implications of different approaches to calculating the information required (where there is flexibility for the taxpayer) to identify any risks or exposures from an international tax or transfer pricing perspective. Some companies are choosing to make changes to their operational structures to address exposures or risks identified in the dry runs.
Q: Are your clients expressing any concern about the EU pending proposals to implement public CbC reporting that would require U.S. MNEs with EU operations above a certain threshold to provide CbC reporting information on their websites for a 5 year period? If so, are they taking proactive steps to restructure any of their tax transactions?
A: Clients are concerned about the EU proposal for public CbC filing for a number of reasons. First, this is a departure from the OECD agreement on CbC, which concluded that public reporting was not appropriate. The increase in unilateral actions that depart from the OECD consensus is of great concern to business as it leads to increased costs and compliance burdens, and undermines the objective of coordinated action that was the goal of the BEPS initiative. Second, forcing public CbC reporting does not increase the ability of tax authorities to enforce their tax rules and collect the right amount of tax. Rather, it increases the risk that enforcement actions will be based on public reactions and political incentives, instead of the application of the rule of law. Finally, the public availability of this data can create competitive concerns as it can provide insight to industry competitors as to strategic directions a company is taking that would not otherwise be apparent from publicly available data. As the purpose of CbC reporting is to improve transparency for tax administrations to aid in risk assessment and enforcement of laws, the costs to companies far outweigh any benefits to tax administrations.
These comments represent the views of the author only, and do not necessarily represent the views or professional advice of KPMG LLP.
The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.
KPMG LLP, the audit, tax and advisory firm (www.kpmg.com/us), is the U.S. member firm of KPMG International Cooperative (“KPMG International”). KPMG International’s member firms have 155,000 people, including more than 8,000 partners, in 155 countries.
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