BUDGET 2016: Ireland to sign up to OECD reporting

Ireland will be among the first to sign up to the OECD’s proposed country by country reporting, as recommended by the base erosion and profit shifting report for the G20.

This goes beyond the existing country by country reporting agreed at EU level and confined to the extractive sector such as timber, oil and minerals.

It is designed to improve international transparency on tax with the Revenue Commissioners learning where a company’s activity takes place and how much tax they pay in each country where they operate. It will not be made public but made available to tax authorities in other countries.

Finance Minister Michael Noonan announced it will begin in January and will apply to big Irish companies such as Ryanair, Kerry, and CRH as well as to multinationals that are headquartered here.

Multinationals with consolidated revenues of €750m per annum will have to submit a report to their parent company tax authority, KPMG said. Britain, Spain, and the US have all said they will adopt it.

The OECD said it requires multinational enterprises to report annually and for each tax jurisdiction in which they do business the amount of revenue, profit before income tax and income tax paid and accrued.

It also requires multinational enterprises to report their total employment, capital, retained earnings and tangible assets in each tax jurisdiction. Finally, it requires multinational enterprises to identify each entity within the group doing business in a particular tax jurisdiction and to provide an indication of the business activities each entity engages in.

The Department of Finance was happy with the outcome of the base erosion and profit shifting report agreement in which it participated in Paris in the last two years. It recently signed up to EU countries exchanging their tax rulings with cross-border companies going back to 2012 but the information could not be used in state-aid cases.

Dan McSwiney, Ernst & Nestor partner transfer pricing, warned that significant effort and cost will be needed to comply with the reporting obligation.

“In addition, businesses will be concerned about the use of this data by tax authorities. The intention is that the information will be used for risk assessment and not as an alternative to proper evaluation of the tax position of affiliates of a multinational corporation in a given territory,” he said.