OECD Launches Public Consultation on the Review of Country-by-Country Reporting

On 6 February 2020 the OECD launched a wide ranging consultation on amendments to Country by Country Reporting.

The 70 page OECD consultation asks for public input on 43 questions and asks for submissions by 6 March 2020. A public consultation meeting will also be held in Paris on 17 March 2020. 

A number of the questions that the OECD consultation discusses are particularly interesting: 

• Should the threshold be lowered from €750m per year so that more companies are required to file a CBCR? At the moment, due to the current threshold, only some 10% of corporate groups are required to file a CBCR so a reduction in threshold could impact many groups.
• Should gains from investments be included when determining whether a group exceeds the €750m threshold or not? At the moment this is only the case if the investment gains are recorded as revenues under the accounting standard that the taxpayer applies. This change could potentially bring many investment funds into the scope of CBCR. 
• Should Table 1 of the CBCR be presented by entity, rather than by country? If adopted this would substantially increase the amount of information that is available to tax authorities.
• Should CBCR figures be consolidated rather than aggregated as they are currently? For many taxpayers this change would significantly increase the compliance burden associated with preparing the CBCR reports.
• Should there be a change in the reporting of entities that are not resident in any tax jurisdiction for tax purposes? This change would particularly impact tax transparent entities and funds and the way that their numbers are reported.
  
• Should additional columns be added to Table 1? For example, should related party interest income, related party royalty income, related party service fee income, related party interest expense, related party royalty expense, total related party expenses, research and development expenditure and deferred taxes be reportable. Whilst these changes would provide tax authorities with additional information that they might find helpful, they would all substantially increase the compliance burden on taxpayers. 
• Should separate CBCRs be prepared by groups that are under common control and which in aggregate have consolidated group revenue above the CBCR reporting threshold? This extension of the CBCR filing obligation could affect individual shareholders who have controlling interest in various (smaller) groups which on an aggregated level exceed €750m threshold, but who are currently not filing a CBCR.

The OECD is not the only body focused on CBCR. For some years now the EU has been discussing the possibility of introducing a public CBCR requirement as well as reduced thresholds, and whilst its proposals have not yet been adopted, they have not been formally rejected either. And the Global Reporting Initiative ("GRI"), which sets standards for sustainability reporting, has recently published the first global sustainability standard for public country-by-country reporting on tax. GRI standards adopters, should meet the tax disclosure requirements, otherwise may be criticised, and they have to explain, why they did not do so. Finally, specific sectors, such as the extractive industries and the banking sector (Capital Requirements Directive IV), are already obliged to publicly disclose certain country-by-country information.