The Chamber

France Ireland Chamber of Commerce Breakfast Seminar Event - Country by Country Reporting

Pictured Left to Right: Cliona McGowan (Ireland France Chamber), Rob Hamill (Mazars), Dawn Thompson (Mazars), Noel Cunningham (Mazars), Frédéric Barat, Mazars and Dermot O’Hara (Mazars).

New EC proposals, if agreed, will oblige multinational companies to publish sensitive financial information on their websites. Ireland has already legislated for country by country reporting along OECD lines. These new rules were outlined at an Ireland France Chamber of Commerce Breakfast Seminar hosted by Mazars.

This event helped attendees to understand the requirements of this draft legislation. Concerns were voiced on the EC’s proposals to publish the information which is in stark contrast to the OECD position, which limits the sharing of information to Revenue authorities in each country.

Noel Cunningham, Head of International Tax, Mazars said: "For businesses, the challenge is one of preserving reputation and of complying with their obligations at a practical level. There is likely to be increased scrutiny arising from both the OECD country by country reporting requirements and from the proposed EU Directive on public country by country reporting for large multinational companies (MNCs). Where there is lack of consistency between substance, in terms of turnover levels or employee numbers, on the one hand, and profit and tax levels on the other, the tax authorities in jurisdictions with high numbers of employees or sales levels yet low profits and tax levels compared with those of other jurisdictions are likely to raise queries into tax returns and potentially to initiate transfer pricing audits. The channelling of profits into tax havens will also be apparent, certainly at the level of the information reported under the OECD guidance to which many countries including Ireland and France have now signed up. This information, even where not publically available, will be exchanged at the tax authority level of participating countries. Locating headquarters in non-participating jurisdictions does not mean that an MNC can avoid the legislation.

The publication of information relating to turnover, employees, profit and tax levels across EU countries on the websites of MNCs carrying on business within the EU, proposed under the Directive, is likely to give rise to commentary from the media and public interest groups. In an environment where businesses are increasingly conscious of perception, in terms of contributing to the economies through “playing fair” in relation to taxation and of “giving back” to society through corporate social responsibility initiatives, negative commentary around inconsistencies between tax, profits and substance could be substantially damaging. Starbucks saw a significant drop in their reputational score following the reporting by Reuters in 2012 that Starbucks had not paid corporation tax in the UK since 2009.

The information required under the OECD guidance is in respect of 2016 and is to be reported by the end of 2017, with automatic exchange of information between participating jurisdictions commencing in 2018. 2015 can be used as a test year for completion of the required tables, the benefit being that where results arise that could lead to scrutiny or negative press, there may be an opportunity for corrective action now. MNCs currently impacted are those with a turnover of in excess of €750 million. It is thought this threshold may be subject to reduction over time.”

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