The Tax Management Transfer Pricing Report ™ provides news and analysis on U.S. and international governments’ tax policies regarding intercompany transfer pricing.
Dec. 13 — New initiatives to increase cooperation between tax administrators and identify tax avoidance better could eventually lead to a single, global tax return for corporations, IRS Commissioner John Koskinen said.
“As you move towards more cooperation with tax administrators trying to look at where double taxation is, when you move towards volumes of information being exchanged in a more transparent global economy, it isn’t a long step to say, from the standpoint of corporations, you could end up with a single tax return,” Koskinen told Bloomberg BNA Dec. 13.
The commissioner pointed to new guidance from the Organization for Economic Cooperation and Development that the U.S. and many other countries have adopted that requires large companies to file a single report outlining the location of employees, income, and facilities. Expanding the approach to include a single template for reporting income could be very beneficial to corporate taxpayers, Koskinen said.
Referring to his time on the board of directors at AES Corp., a Washington-based power company, Koskinen noted the administrative challenge of preparing returns for different jurisdictions.
“The amount of time they spent trying to appropriately file tax returns and pay the right amount in 27 countries was phenomenal,” he said.
Allowing companies to file a single return, outlining revenue, expenses, and operations, could be a “great boon” to companies, he added.
“And it’s not clear to me that you won’t end up moving in that direction. At some point corporations are going to say, ‘Hey, we’re giving you all this data, why can’t we just put it all together in a standard template and you could figure out what percentage you want to apply against it?’ ” he said.
The OECD’s recommendation for country-by-country reporting, where companies disclose their taxes paid, profits earned, employees and other information for every country of operation has been the most widely adopted plank in the organization’s sweeping plan to combat tax base erosion and profit shifting.
By requiring companies to submit global outlines of their business operations, tax administrators could better identify transactions that may be involved in artificially avoiding tax, according to the final report. The reporting scheme raised fears among taxpayers that the reports could be used as the basis of an audit—something the OECD guidelines prohibit—and could be the precursor for a formulary system of global taxation.
The U.S., which issued final rules on country-by-country reporting in June, is collecting country-by-country reports for companies with tax years beginning after June 30, 2016. Many other countries put the rules into effect Jan. 1, 2016.
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