The EU proposal on country-by-country reporting on the Internet

Stiftung Familienunternehmen
Munich, 2021
ZEW Mannheim
Verena K. Dutt, Prof. Dr. Christoph Spengel, Heiko Vay

High costs – little benefit

There has long been a public debate regarding whether and how to prevent or reduce possible profit shifting by multinational companies. Against this background, this study focuses primarily on the question of whether the already practised sharing of tax data between tax authorities (country-by-country reporting, CbCR) is sufficient. As well as whether a proposal put forward by the Finnish EU Council Presidency that goes beyond this would bring further improvements.

According to this proposal, large European companies are to be obliged to disclose their economic activities, their profits and the taxes paid on them to the general public on a country-by-country basis.

The authors of the study make it clear that the costs to companies associated with public reporting would presumably exceed the general benefits. However, this is less about the direct costs and more about “the potential implicit costs from distortions of competition and locational disadvantages, which will particularly affect larger family businesses”.

In addition, they point out that the actual extent of profit shifting is still highly disputed. Secondly, they point out that restricting profit shifting opportunities could also result in a noticeable reduction in real investment in some industrialised countries.

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