Tax & Accounting Blog

What’s the real motivation behind country-by-country reporting?

Global Tax Compliance, Tax Provision, Transfer Pricing, US Income Tax Compliance, WorkFlow Manager December 20, 2011

The Financial Integrity & Economic Development annual conference in early October of this year highlighted how corporate taxpayers could benefit from more transparency in reporting standards.

The idea behind the potential benefits to both corporate taxpayers and governments flow from the following concept: transparency assures honesty and accuracy and potential maximization of tax revenue. Yet what motivation would companies have in complicating their accounting and disclosure processes and expanding country-by-country reporting?

 There is an argument to be made that the increased disclosures could help companies maintain good relations with civil societies by proving that they are paying their fair share of taxes. The more tangible reason for more transparent reporting, however, is that aggressive tax policies endanger sustainable profit stability. For example, should a law in a tax haven suddenly change, even if the business is stable, profits will suddenly fall. As a result, shareholders may be the true impetus that necessitates country-by-country reporting rather than civil society as a whole.

For more information and to read the original article published by International Tax Review.