BEPS Policy Failure—The Case of EU Country-By-Country Reporting¹

Abstract

The tax gap between taxes that are “actually” paid and taxes that “ought” to have been paid by multinational corporate entities has become an area of huge public policy concern in the recent decades. This study reviews the impact of new legislation to reveal the tax gap created by the EU banks and financial institutions passed in 2013 and in particular of the quality of the resulting country-by-country reporting (CBCR) requirement for banks. Although resulting tax gap estimates are noted, they suffer due to significant problems in the published data; much of it is due to the quality of the regulation requiring its publication and implementation. The findings reveal a lack of understanding of the technical and structural weaknesses of accounting in a transnational context in the design of this regulation. CBCR is destined to fail in achieving its regulatory objectives in this context unless necessary reform of the regulation is undertaken.

Illicit financial flows and country-by-country reporting in extractive industries

“…Some of the key actors in bringing CBCR to fruition, including experts and organizations favouring CBCR (Seabrooke and Wigan 2015), keep proposing improvements to the existing CBCR standards (e.g., Murphy et al 2019 for the banking standard). But the multitude of actors involved with the standards is reflected in the incoherence and differences between them, as different compromises have been reached over their coverage and accessibility.…”

“…Whether this objective has been achieved is a question examined by Murphy et al (2019), who reveals a lack of understanding of the technical and structural weaknesses of accounting in a transnational context in the design of the regulation.…”

Ethical and Legal Responsibility of Multinational Corporate Groups for a Fair Share of Taxes

“…Yet, it is by no means self-evident that treating groups as tax subjects reduces the extent of tax avoidance. Finally, treating groups as taxpayers requires considerable coordination and commitment of the concerned jurisdictions since it is necessary to agree on one obligatory solution and, especially, on one way of determining the allocable profit of multinational corporate groups since accounting rules may differ (Schreiber et al 2020;Murphy and Sikka 2017;Murphy, Jansky, and Shah 2019). Therefore, the realizability of the "treating the group as tax subject" idea is at least doubtful (Schreiber et al 2020;Bird 2018).…”

Who generated the loopholes? A case study of corporate tax advisors’ regulatory capture over anti-tax avoidance legislation in Finland

“…He concludes that they successfully used technicization of policy discussions as a tool to re-frame public CBCR as excessive tax transparency. This eventually "moved CBCR from a revolutionary public lever for systemic change to a confidential risk assessment tool" (see also Murphy, Janský, and Shah 2019).…”