Out-Law News | 22 Sep 2014 | 2:49 pm | 1 min. read
The statement means that the UK is the first of the 34 countries that are members of the Organisation for Economic Cooperation and Development (OECD) to formally commit to implementing the body's new country-by-country reporting framework. This was one of a number of proposals issued by the OECD last week as part of its project to create a single set of international tax rules and prevent multinationals from artificially shifting profits to low-tax jurisdictions.
Tax expert Heather Self of Pinsent Masons, the law firm behind Out-Law.com, said that the UK was "keen to drive ahead" on measures to tackle international tax avoidance, and so had given early confirmation of its intentions.
"The detailed filing requirements are still to be settled but businesses will be concerned to ensure that the compliance burdens are proportionate," she said.
The OECD set out its first series of recommendations on base erosion and profit shifting (BEPS) in seven detailed reports last week. The project was commissioned by the leaders of the largest global economies during the UK's presidency of the G8 last year. Among the OECD's recommendations are proposals to neutralise so-called hybrid mismatch arrangements, prevent the abuse of tax treaties and ensure that transfer pricing rules do not allow companies to avoid being taxed in the jurisdictions where they make their profits.
Requiring companies to report on profits earned and taxes paid on a country-by-country basis will help tax authorities to gather information on their global activities, profits and taxes, according to the OECD. The idea is that this will help them to better assess where risks lie and where their efforts to discourage tax avoidance should be focused.
EU-wide country-by-country reporting requirements for oil, gas and mining companies will come into force for UK-registered companies on 1 January 2015, six months before the EU's Accounting and Transparency Directives formally come into force, the UK government announced last month. There new rules will require large extractive and logging companies to report the payments that they make to governments, including taxes, on a country-by-country basis or on a project basis where payments have been attributed to specific projects.
"The UK has been at the forefront of tackling international tax avoidance," said David Gauke, financial secretary to the UK Treasury. "We believe that country-by-country reporting will improve transparency and help identify risks for tax avoidance - that's why we're formally committing to it."
"Reporting high level information using a standardised format across all jurisdictions will ensure consistency, give tax authorities the information they need and minimise the additional administration burden on business," he said.
Editor's note 01/10/2014: this article previously put the number of countries in the OECD at 44. We have corrected this to 34 and apologise for the error.