With more tax information, governments should strive to better understand business

OECD Observer Business brief

"Building more trust between companies and tax authorities will help inform the current public discussion of tax issues, creating a more fruitful conversation about tax policy choices for the 21st century."

The Organisation for Economic Co-operation and Development (OECD) has long played a leading role in facilitating the exchange of tax information by tax authorities. The publication on 18 June of a proposed framework for developing a standard multilateral model for automatic exchange of financial account information was another significant milestone in the broader conversation about tax information exchange and transparency.

The proposed framework, modeled after the Foreign Account Tax Compliance Act in the United States, would require a global partnership between financial intermediaries and tax authorities of multiple countries, with the private sector investing resources to provide assistance to tax authorities on a global scale for the first time.

Implementing the framework would require substantial changes in systems and processes for most financial services organisations. It should also prompt careful consideration by tax authorities of how they can best use the information that would be obtained through the proposed mechanism and how they can minimise the burden imposed on financial services firms in providing needed tax information.

Additional tax transparency between businesses and governments can be appropriate and productive, particularly when it leads to greater mutual understanding of the needs of both tax administrators and taxpayers, and creates a more consistent approach that reduces uncertainty for all parties.

Tax authorities need to know a company’s income and expenses, and taxes paid. But sometimes the company can benefit if the tax authorities understand more about their business. This greater understanding can help authorities understand the fuller context for tax positions taken. Companies need to be open and responsive with the relevant tax authorities. But the prudent company will go beyond merely reacting and will consider where it is appropriate to be proactive in their dealings with the tax authorities. Companies of course need to answer the questions that the tax authorities ask. And sometimes companies should raise and answer the questions that the tax authorities may not have asked yet.

For example, a company might benefit from taking a more open and proactive approach toward disclosure and discussion with tax authorities of its transfer pricing arrangements. Regulatory change often causes material change to business models and group structures, and uncertainty around tax issues may cause enterprises to make suboptimal business choices. Helping the tax authorities and companies to best understand the regulatory landscape and how organisations are likely to change in reaction to it would likely lead to a more constructive relationship.

Any new push to require wide-scale public release of tax information would be counterproductive to the constructive dialogue between taxpayers and the tax authorities. The need for greater transparency and more information is about constructive and productive taxpayer to tax authority dialogue, not something that should play out on the public stage.

It is essential that confidentiality is maintained as transparency must be built on mutual trust. Fears that commercially sensitive information could potentially be released would undermine such trust.

It is also important that any new transparency requirements be agreed on a multilateral basis; the unilateral adoption of “custom” country-specific requirements on an isolated basis would further increase the compliance burden for business. To that end, the OECD deserves recognition for stressing the need for coordinated action and a multilateral approach to tax information sharing.

Building more trust between companies and tax authorities will help inform the current public discussion of tax issues, creating a more fruitful conversation about tax policy choices for the 21st century.

The business community and tax authorities share a common interest in the objective of having tax systems that are suited to the ever-changing global business environment, that provide certainty to business and that can be administered by tax authorities across geographies. Transparency between taxpayers and tax authorities can contribute to achievement of that objective. 

Visit www.oecd.org/tax/ 

EY Legal Disclaimer This publication contains information in summary form and is therefore intended for general guidance only. It is not intended to be a substitute for detailed research or the exercise of professional judgment. Member firms of the global EY organisation cannot accept responsibility for loss to any person relying on this article.




©OECD Observer No 295, Q2 2013

See other OECD Observer Business Briefs


Economic data

GDP growth: +0.6% Q1 2019 year-on-year
Consumer price inflation: 2.3% May 2019 annual
Trade: +0.4% exp, -1.2% imp, Q1 2019
Unemployment: 5.2% July 2019
Last update: 8 July 2019

OECD Observer Newsletter

Stay up-to-date with the latest news from the OECD by signing up for our e-newsletter :

Twitter feed

Subscribe now

<b>Subscribe now!</b>

To order your own paper editions,email Observer@OECD.org

Online edition
Previous editions

Don't miss

  • MCM logo
  • The following communiqué and Chair’s statement were issued at the close of the OECD Council Meeting at Ministerial level, this year presided by the Slovak Republic.
  • Food production will suffer some of the most immediate and brutal effects of climate change, with some regions of the world suffering far more than others. Only through unhindered global trade can we ensure that high-quality, nutritious food reaches those who need it most, Angel Gurría, Secretary-General of the OECD, and José Graziano da Silva, Director-General of the United Nations Food and Agriculture Organization, write in their latest Project Syndicate article. Read the article here.
  • Globalisation will continue and get stronger, and how to harness it is the great challenge, says OECD Secretary-General Gurría on Bloomberg TV. Watch the interview here.
  • OECD Secretary-General Angel Gurría with UN Secretary-General António Guterres at the 73rd Session of the UN General Assembly, in New York City.
  • The new OECD Observer Crossword, with Myles Mellor. Try it online!
  • Listen to the "Robots are coming for our jobs" episode of The Guardian's "Chips with Everything podcast", in which The Guardian’s economics editor, Larry Elliott, and Jeremy Wyatt, a professor of robotics and artificial intelligence at the University of Birmingham, and Jordan Erica Webber, freelance journalist, discuss the findings of the new OECD report "Automation, skills use and training". Listen here.
  • Do we really know the difference between right and wrong? Alison Taylor of BSR and Susan Hawley of Corruption Watch tell us why it matters to play by the rules. Watch the recording of our Facebook live interview here.
  • Has public decision-making been hijacked by a privileged few? Watch the recording of our Facebook live interview with Stav Shaffir, MK (Zionist Union) Chair of the Knesset Committee on Transparency here.
  • Can a nudge help us make more ethical decisions? Watch the recording of our Facebook live interview with Saugatto Datta, managing director at ideas42 here.
  • The fight against tax evasion is gaining further momentum as Barbados, Côte d’Ivoire, Jamaica, Malaysia, Panama and Tunisia signed the BEPS Multilateral Convention on 24 January, bringing the total number of signatories to 78. The Convention strengthens existing tax treaties and reduces opportunities for tax avoidance by multinational enterprises.
  • Globalisation’s many benefits have been unequally shared, and public policy has struggled to keep up with a rapidly-shifting world. The OECD is working alongside governments and international organisations to help improve and harness the gains while tackling the root causes of inequality, and ensuring a level playing field globally. Please watch.
  • Checking out the job situation with the OECD scoreboard of labour market performances: do you want to know how your country compares with neighbours and competitors on income levels or employment?
  • Trade is an important point of focus in today’s international economy. This video presents facts and statistics from OECD’s most recent publications on this topic.
  • The OECD Gender Initiative examines existing barriers to gender equality in education, employment, and entrepreneurship. The gender portal monitors the progress made by governments to promote gender equality in both OECD and non-OECD countries and provides good practices based on analytical tools and reliable data.
  • Interested in a career in Paris at the OECD? The OECD is a major international organisation, with a mission to build better policies for better lives. With our hub based in one of the world's global cities and offices across continents, find out more at www.oecd.org/careers .
  • Visit the OECD Gender Data Portal. Selected indicators shedding light on gender inequalities in education, employment and entrepreneurship.

Most Popular Articles

OECD Insights Blog

NOTE: All signed articles in the OECD Observer express the opinions of the authors
and do not necessarily represent the official views of OECD member countries.

All rights reserved. OECD 2019