International Financial Law Prof Blog

Editor: William Byrnes
Texas A&M University
School of Law

Monday, May 30, 2016

Government of Canada signs international agreement on enhanced tax reporting by large multinationals

National Revenue Minister Diane Lebouthillier announced today that the Government of Canada has taken another step to stop the unfair practice of aggressive tax planning by signing an international agreement to implement stronger international reporting obligations for large multinational enterprises (MNEs). Thirty-one other jurisdictions have also signed the agreement.

The Canada Revenue Agency (CRA) told participants at the Forum on Tax Administration (FTA) meeting in Beijing, China today that the Minister has signed the Multilateral Government_of_Canada_signature.svgCompetent Authority Agreement (MCAA) on country-by-country reporting. The agreement paves the way for Canada and its international treaty partners to obtain and share information on large global businesses.

The signing of the agreement is part of the CRA's four-point action plan to address tax evasion and tax avoidance. The action plan includes measures to expand the information sources available to the CRA, strengthen its cooperation with international partners, and minimize opportunities for multi-national enterprises to shift taxable profits away from the jurisdictions where the underlying economic activity has taken place.

This new reporting requirement is a recommendation of the G20/Organisation for Economic Cooperation and Development (OECD) Base Erosion and Profit Shifting (BEPS) project, which aims to address international tax planning strategies used by MNEs to inappropriately minimize their taxes.

Budget 2016 announced that Canada would introduce legislation to implement country-by-country reporting. Under this proposal, multi-national enterprises with annual consolidated group revenue of €750 million (approximately $1.1 billion CAD) or more will be required to provide "country-by-country reports" that contain their income, taxes paid, and key economic activities. With the MCAA in place, this information will be shared by participating countries within their treaty networks and allow them to, both individually and collectively, improve their ability to audit and detect aggressive international tax avoidance.

The reports will help to ensure that the global operations of these enterprises are more transparent and that they pay appropriate taxes in the countries where their profits are generated.

Quotes

"Our government's Budget 2016 investments in the CRA will ensure that the Agency has the capacity to expand its audits of high-risk multinational corporations. The additional information that we will provide to, and receive from, our treaty partners under this important international agreement will support worldwide efforts to reinforce international tax rules and prevent tax avoidance. Canada is pleased to be an active contributor in this effort."

The Honourable Diane Lebouthillier, P.C., M.P., Minister of National Revenue

Quick facts

  • Canada has one of the world’s largest treaty networks, with 92 tax treaties and 22 tax information exchange agreements in place.
  • Under the budget proposal, country-by-country reports will be required to be filed by MNEs with group revenue of over € 750 million covering all tax jurisdictions in which they do business for taxation years beginning after 2015.
  • These reports will be shared among the MCAA signatories beginning in June 2018, providing them with the ability to better assess for taxation purposes the transactions entered into by MNEs.

Associated Links

https://lawprofessors.typepad.com/intfinlaw/2016/05/government-of-canada-signs-international-agreement-on-enhanced-tax-reporting-by-large-multinationals.html

BEPS, OECD | Permalink

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