Friday, July 10, 2020
New OECD CbCR corporate tax statistics data crunch with analysis of activities of multinational enterprises
New data, released today, provides aggregated information on the global tax and economic activities of nearly 4,000 multinational enterprise (MNE) groups headquartered in 26 jurisdictions and operating across more than 100 jurisdictions worldwide.
The data, released in the OECD’s annual Corporate Tax Statistics publication, is a major output based on the Country-by-Country Reporting requirements for MNEs under the OECD/G20 Base Erosion and Profit Shifting (BEPS) Project.
The BEPS Project has seen more than 135 jurisdictions collaborating to tackle tax avoidance strategies by MNEs that exploit gaps and mismatches in international tax rules to avoid paying tax. Under Country-by-Country Reporting, large MNEs are required to disclose important information about their profits, tangible assets, employees as well as where they pay their taxes, in every country in which they operate. Country-by-Country reports (CbCRs) provide tax authorities with the information needed to analyse MNE behaviour for risk assessment purposes, and with the release of today’s anonymised and aggregated statistics will support the improved measurement and monitoring of BEPS.
The anonymised and aggregated CbCR statistics for 2016 have been provided to the OECD by member jurisdictions of the Inclusive Framework on BEPS. This new dataset contains a vast array of aggregated data on the global tax and economic activities of MNEs, including profit before income tax, income tax paid (on a cash basis), current year income tax accrued, unrelated and related party revenues, number of employees, tangible assets and the main business activity (or activities) of MNEs.
While the data contain some limitations and it is not possible to detect trends in BEPS behaviour from a single year of data, the new statistics suggest a number of preliminary insights:
- There is a misalignment between the location where profits are reported and the location where economic activities occur, with MNEs in investment hubs reporting a relatively high share of profits compared to their share of employees and tangible assets.
- Revenues per employee tend to be higher where statutory CIT rates are zero and in investment hubs.
- On average, the share of related party revenues in total revenues is higher for MNEs in investment hubs.
- The composition of business activity differs across jurisdiction groups, with the predominant business activity in investment hubs being “holding shares and other equity instruments”.
Noting the limitations of the data and that these observations could also reflect some commercial considerations, they are indicative of the existence of BEPS behaviour and reinforce the need to continue to address remaining BEPS issues as part of the Inclusive Framework’s work on Pillar 2 of the ongoing international efforts to address the tax challenges arising from digitalisation.
The new OECD analysis also shows that corporate income tax remains a significant source of tax revenues for governments across the globe, accounting for 14.6% of total tax revenues on average across the 93 jurisdictions in 2017, compared to 12.1% in 2000. Corporate taxation is even more important in developing countries, comprising on average 18.6% of all tax revenues in Africa and 15.5% in Latin America and the Caribbean, compared to 9.3% in the OECD.
This second edition of Corporate Tax Statistics also collects for the first time, information on controlled foreign company (CFC) rules, which are designed to ensure the taxation of certain categories of MNE income in the jurisdiction of the parent company in order to counter certain offshore structures that result in no or indefinite deferral of taxation (BEPS Action 3); as well as new data on interest limitation rules, which can assist in understanding progress related to the implementation of BEPS Action 4.
The publication and data are accessible at: https//oe.cd/corporate-tax-stats
A list of Frequently Asked Questions on CbCR is available at https://oe.cd/corporate-tax-stats-CbCR-FAQ
Texas A&M University School of Law has launched its online international tax risk management graduate curricula for industry professionals.
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