The Role of Country by Country Reporting in the Regulation of Aggressive Tax Planning Strategies Employed by Multinational Enterprises

Abstract

At present, the determination of tax rate and tax collection are a matter of sovereignty under the domain of Nation-states. However, the ability of the domestic governments to tax Multinational Enterprises has been significantly challenged by two developments that have reshaped the economy, namely digitalization and globalization.

In order to counter the practice of tax avoidance widely employed by global businesses, the OECD led a number of other institutions in the recognition of the need for an enhancement of transparency, through the introduction of Country-by-Country Reporting (CbC Reporting). However, the measure in the form recommended by the OECD, does not provide a powerful and systematic instrument to tackle tax avoidance, as it presents a series of flaws that hamper its efficacity.

The paper argues in favor of a bold approach to disclosure, and reiterate the need to grant all stakeholders, the right to access information concerning global businesses, on a country-by-country basis. Public CbC Reporting is deemed to represent a turning point in the fight against tax avoidance. In fact, it would entail a large number of benefits, it would give the fight against tax avoidance a systematic nature, as detection of financial crime is, at present, strictly connected with the appearance of major scandals.