CbCR, ICAP And CRS - Taxpayer’s Rights In An Age Of Data Collection

; posted on
September 7th, 2018

The collection of information by tax authorities entails a correlative taxpayers’ right to access such information and correct its inaccuracies, along with an obligation for tax authorities to protect its confidentiality to the fullest extent possible from any form of misuse, either by tax administration officials or by third parties. However, while the legislative bodies (both national and international) have been increasingly imposing additional compliance burdens on multinational corporations, little has been said about the rights of these multinational taxpayers in this dynamic context.

With the launch of Country-by-Country Reporting (“CbCR”), the OECD made the first move in leading global tax administrations to have access to multi-year entity level data along with a list of stateless entities from large multinational organisations and national governments followed in almost no time. Now that the automatic exchange of CbCR is a reality, even with tax administrations of countries whose privacy and dispute resolution laws are still under (much-needed) development, do multinational corporations really have any room left for error in such reported data?

In a more recent development, through the International Compliance Assurance Program (“ICAP”) International Compliance Assurance Program, where 8 countries (Australia, Canada, Italy, Japan, the Netherlands, Spain, the United Kingdom and the United States) are collaborating to develop a joint assessment mechanism, with a goal to ultimately provide the tax authorities ample ammunition to challenge taxpayers’ tax and transfer pricing structures through use of financial and tax data analytics.

While additions to reporting requirements such as through the Common Reporting Standard (“CRS”) are seen globally, an equal emphasis on the protection of such data collected and shared via online platforms of various tax administrations is clearly lacking. Thus, while the taxpayers are legally bound to report confidential, tax sensitive information, they are left with minimal to limited recourse in case of misuse of such information. This attitude is also evident from a recent publication of the OECD on ‘Fighting Tax crime’, where the rights of taxpayers find a bleak mention, being listed as right of suspects.

Thus, in order to protect themselves from tax related risks as well as reputational damage, multinational corporations need to take a proactive step in managing their tax related workflows. Some examples of steps that can be taken by an MNE to attain more control over their business and tax related risks are:

  • of financial and tax data analytics
  • Adopting a global tax compliance set-up
  • Streamlining risk planning, provisioning and ETR impact
  • Aligning governance and operational conduct
  • Managing in-house challenges
  • Ensuring clear and efficient communication to all stakeholders

For more information on ‘staying out of trouble and being fully in control’, please visit this link:
https://www.youtube.com/playlist?list=PL8yzOi7NNJJBcl2L-1d7coEHGb9lSR427

If we bear caution with respect to our personal data that is collected by companies such as Apple and Facebook, and as natural persons, we have far more rights than legal persons such as corporations, should at least the same caution not be exerted with respect to data of corporations collected by tax administrations?

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