Van Hollen, Axne, and Doggett Lead Bicameral Letter Urging the OECD to Require More Transparent Tax Reporting
Country-by-Country Reporting will Shed Light on Corporations’ Use of Tax Havens
Today, U.S. Senator Chris Van Hollen (D-Md.) and Representatives Cindy Axne (D-Iowa) and Lloyd Doggett (D-Tex.) led a letter signed by 33 Senators and Representatives to the Organisation for Economic Co-operation and Development (OECD), urging the organization to strengthen country-by-country reporting rules during their upcoming review of current standards and to require corporations to publicly disclose these country-by-country reports. As the members note in their letter, improved country-by-country reporting data is a crucial first step to ensuring large corporations pay their fair share of taxes. In addition to the letter, Senator Van Hollen and Representative Axne have introduced legislation that would require large U.S. multinational corporations to publicly disclose the country-by-country financial and tax information that they already report on a confidential basis to the IRS under the current OECD framework.
The Members write, “Thank you for the opportunity to comment on the OECD country-by-country reporting rules as part of your review process. As Members of Congress, we are focused on making the tax system fairer for working families by ensuring that multinational corporations are paying their fair share. The OECD country-by-country reports are an important first step, and we encourage you to build on this progress by strengthening the standards for country-by-country reporting and requiring public disclosure of these reports.”
They continue, “Large multinational corporations use a variety of accounting maneuvers to shift profits into tax haven countries to avoid taxes in countries like the United States where they operate. Country-by-country reports from individual corporations are not currently public, but the Internal Revenue Service has published alarming figures on tax haven abuse by aggregating the data it receives in these reports. For example, U.S. corporations booked $32 billion of profits in Bermuda in 2017, despite having only 547 employees there.
The Members go on to highlight the importance of this reporting, noting, “Public country-by-country reports would show which corporations are booking profits in tax havens, and better inform future policy changes regarding international corporate taxation.”
They close the letter, stating, “We are pleased to see the OECD considering a lower threshold for requiring multinational corporations to report country-by-country information. A more complete picture of multinational corporate finances would improve tax administration and enforcement, especially with regard to developing countries with fewer very large corporations.”
In the Senate, the letter was signed by: Chris Van Hollen (D-Md.), Sheldon Whitehouse (D-R.I.), Richard J. Durbin (D- Ill.), Bernard Sanders (I-Vt.), Elizabeth Warren (D-Mass.), Tammy Duckworth (D-Ill.), Edward J. Markey (D-Mass.), Jack Reed (D-R.I.), Cory A. Booker (D-N.J.), Sherrod Brown (D-Ohio), Amy Klobuchar (D-Minn.), Tammy Baldwin (D-Wis.), and Richard Blumenthal (D-Conn.).
In the House, the letter was signed by: Cindy Axne (D-Iowa), Lloyd Doggett (D- Texas), Eleanor Holmes Norton (D-DC), Stephen F. Lynch (D-Mass.), Jan Schakowsky (D-Ill.), Barbara Lee (D-Calif.), Peter A. DeFazio (D-Ore.), Donald S. Beyer Jr. (D-Va.), Jennifer Wexton (D-Va.), Mark Pocan (D-Wis.), Sean Casten (D-Ill.), Ayanna Pressley (D-Mass.), Jesús G. “Chuy” García (D-Ill.), Bill Foster (D-Ill.), Mary Gay Scanlon (D-Pa.), Pramila Jayapal (D-Wash.), Rosa L DeLauro (D-Conn.), Ro Khanna (D-Calif.), Madeleine Dean (D-Pa.), and Rashida Tlaib (D-Mich.).
The text of the letter is available here and below:
Dear Secretary-General Gurría,
Thank you for the opportunity to comment on the OECD country-by-country reporting rules as part of your review process. As Members of Congress, we are focused on making the tax system fairer for working families by ensuring that multinational corporations are paying their fair share. The OECD country-by-country reports are an important first step, and we encourage you to build on this progress by strengthening the standards for country-by-country reporting and requiring public disclosure of these reports.
Country-by-country information should be publicly available
Large multinational corporations use a variety of accounting maneuvers to shift profits into tax haven countries to avoid taxes in countries like the United States where they operate. Country-by-country reports from individual corporations are not currently public, but the Internal Revenue Service has published alarming figures on tax haven abuse by aggregating the data it receives in these reports. For example, U.S. corporations booked $32 billion of profits in Bermuda in 2017, despite having only 547 employees there.
Public country-by-country reports would show which corporations are booking profits in tax havens, and better inform future policy changes regarding international corporate taxation. Investors face heightened financial risk when they lack access to complete information about a company’s tax strategy, valuation, and management approach. In the U.S. and countries around the world, policymakers, investors, and citizens would all benefit from more transparency from multinational corporations.
Reporting standards should be aligned with the Global Reporting Initiative (GRI) model
GRI sets reporting standards used by 78 percent of companies in the Dow Jones Industrial Average and 75 percent of NASDAQ 250 companies, and the GRI country-by-country reporting standard that should inform your deliberations. GRI developed this standard in consultation with multinational corporations, accounting firms, academics, and other stakeholders in addition to investors. Broadly speaking, aligning the various country-by-country standards would ease recordkeeping burdens for businesses and present a clearer picture to users of these reports.
The GRI standard requires multinational corporations to report their operations in each country on a consolidated basis, rather than an aggregated basis, which presents a more accurate picture of corporate activity in each country. When a corporation has multiple subsidiaries in the same country that engage in transactions with each other, aggregated reports can present an exaggerated picture of the level of business activity in that country.
Requiring more multinational corporations to file reports deserves serious consideration
The OECD’s current standard currently requires country-by-country reports from companies with annual revenues of at least €750 million ($850 million), exempting many large multinational corporations that may be engaged in tax avoidance. We are pleased to see the OECD considering a lower threshold for requiring multinational corporations to report country-by-country information. A more complete picture of multinational corporate finances would improve tax administration and enforcement, especially with regard to developing countries with fewer very large corporations.
Thank you for your consideration.
Sincerely,
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