Fair Tax Mark sets multinationals up for success with public Country-by-Country Reporting
Public Country-by-Country Reporting (pCbCR) of financial and tax information by multinational enterprises is a hot topic in financial reporting right now.
Businesses that report country by country disclose the profits and taxes they pay in each country they operate. Reporting this publicly and comprehensively is already a requirement for multinational businesses to become Fair Tax Mark accredited, but legislative and accounting developments, investor pressure and increasing use of voluntary standards, will see more companies taking it on.
Last month, we were delighted to see Australia pass legislation to force pCbCR for large multinationals operating there. In the European Union, the first set of mandatory country-by-country tax transparency reports are due over the next 24 months. And in the United States, a radical change in accounting and reporting standards means many US-headquartered multinationals will need to make enhanced disclosures in future (regardless of the recent national election result).
Institutional investors, asset managers and ratings agencies – already salivating at the prospect of this information coming through – are also applying the pressure on businesses to report. For example, pCbCR is the subject of investor resolutions (witness the recent Annual General Meetings of Amazon, Cisco, Chevron, ConocoPhillips ExxonMobil and Microsoft).
In addition, voluntary publishing rates are steadily ticking up, especially across Europe. A recent global tax survey found that 85% of senior business leaders within multinational business expect stakeholder interest in tax behaviours to increase in the coming years, and 60% expect to align themselves with one or more tax transparency standards.
Our recently updated paper, Public Country-by-Country Reporting: Why and how multinationals should lift the lid on their taxes, digs into these three areas in more detail, and outlines the Fair Tax Mark’s stipulations for pCbCR disclosure.
Real-world impact
And while legislation, increased pressure and voluntary disclosure trends will raise the tax transparency bar considerably, there is also evidence to suggest it has a positive impact on responsible corporate behaviour.
Where mandatory pCbCR has already been introduced (e.g., in connection with large European banks and extractive industries), there is evidence of reduced use of tax havens, reduced profit shifting, increased effective tax rates and increased domestic tax revenue mobilisation.
Mandatory pCbCR would also enable low and lower middle-income countries to have access to large multinationals’ CbCR data for the first time – given the majority of these countries are currently locked out of global confidential information sharing systems.
Fair Tax Mark businesses ahead of the curve
Businesses that are Fair Tax Mark accredited are well placed to transition painlessly to a world where a step change in tax transparency is increasingly expected, if not a mandatory requirement.
Our pCbCR paper details the full set of data we expect multinational businesses to report, with an accompanying narrative explanation, on a CbC basis, to become Fair Tax Mark accredited.
We have also prepared a CbC reporting table that can be used – and which, if completed fully, would score full points in section three of our Global Multinational Business Standard assessment.
The Fair Tax Foundation work with businesses collaboratively on pCbCR and all other elements of the Fair Tax Mark, so don’t hesitate to get in touch with any questions about reporting or to enquire about becoming accredited.
