New OECD data provides insight into MNE tax activity

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The data, released on July 8, is a major output based on the country-by-country reporting requirements for MNEs under the BEPS project.  

OECD data provides insight into MNE tax activity

The OECD has published new data providing aggregated information on the global tax and economic activities of nearly 4,000 multinational enterprise (MNE) groups headquartered in 26 jurisdictions and operating across more than 100 jurisdictions worldwide.

The data, released on July 8, is a major output based on the country-by-country (CbC) reporting requirements for MNEs under the base erosion and profit shifting (BEPS) project.  

Under CbC reporting, large MNEs are required to disclose important information about their profits, tangible assets, employees as well as where they pay their taxes, in every country in which they operate. These reports provide tax authorities with the information needed to analyze MNE behaviour for risk assessment purposes.

The new dataset contains a vast array of aggregated data on the global tax and economic activities of MNEs, including profit before income tax, income tax paid (on a cash basis), current year income tax accrued, unrelated and related party revenues, number of employees, tangible assets and the main business activity (or activities) of MNEs. The data suggests the following:

  • There is a misalignment between the location where profits are reported and the location where economic activities occur, with MNEs in investment hubs reporting a relatively high share of profits compared to their share of employees and tangible assets;
  • Revenues per employee tend to be higher where statutory corporate income tax rates are zero and in investment hubs;
  • On average, the share of related-party revenues in total revenues is higher for MNEs in investment hubs;
  • The composition of business activity differs across jurisdiction groups, with the predominant business activity in investment hubs being “holding shares and other equity instruments.”

The new OECD analysis also shows that corporate income tax remains a significant source of tax revenues for governments across the globe, accounting for 14.6 percent of total tax revenues on average across the 93 jurisdictions in 2017, compared to 12.1 percent in 2000. Corporate taxation is even more important in developing countries, comprising on average 18.6 percent of all tax revenues in Africa and 15.5 percent in Latin America and the Caribbean, compared to 9.3 percent in the OECD.

The author is Alex Hunter, Editor, TP News. He oversees and updates the publication and also  regularly writes news stories about transfer pricing and international tax law. Alex is reachable at editor@transferpricingnews.com