This is good news and would help combat tax avoidance by multinationals, if Nigeria has the expertise to implement at the Federal Inland Revenue Service.
28 Jan 16
More than thirty countries have today signed an agreement that enables the automatic sharing of country-by-country financial reports from multinational companies.
Tax authorities spanning Europe, Africa, Asia and the Americas, will now automatically be able to access information that provides them with a more complete understanding of the way a multinational enterprise is structured.
The agreement is part of the OECD’s reforms to the international tax architecture endorsed by G20 leaders in November last year, known as the BEPS (Base Erosion and Profit Shifting) project, which attempts to prevent multinational companies from using holes in the global tax system to shift projects to lower-tax jurisdictions.
Companies will now have to produce a more detailed report of their structure and activities in each country in which they operate. These reports will then be automatically shared between the relevant participating tax authorities, who will as a result be better able to spot a company trying to use complex company structures to protect their profits from tax.
“Country-by-country reporting will have an immediate impact in boosting international cooperation on tax issues, by enhancing the transparency of multinational enterprise operations,” said OECD secretary-general Angel Gurría.
“Under this multilateral agreement, information will be exchanged between tax administrations, giving them a single, global picture on the key indicators of multinational businesses. This is a much-needed tool towards the goal of ensuring that companies pay their fair share of tax, and would not have been possible without the BEPS project.”
After two years of discussion and endorsement by G20 leaders last year, the BEPS project is now in the implementation phase. It will see 15 actions taken to reform the international tax framework to ensure a company reports its profits where its economic activities take place and value is created.
However some have argued have noted that the OECD’s reforms do not go far enough and that many developing counties, who lack the capacity to comply with confidentiality safeguards for example, may not be able to benefit from the project.
The bulk of the 31 countries who signed the agreement today are in Europe. Other jurisdictions include Australia, Chile, Costa Rica, Japan, Malaysia, Mexico, Nigeria and South Africa.
Most participating countries are currently updating domestic legislation and frameworks and will begin automatically sharing tax information from 2017 or 2018.
This article was originally published in Public Finance International.