Recent reports that the European Union is working on legislation to require global companies to publically disclose tax and other financial information is raising red flags for U.S. manufacturers that operate in European countries. The latest information disclosure proposal—coming on the heels of the new information requirements in the Base Erosion and Profit Shifting (BEPS) plan finalized late last year by the Organisation for Economic Co-operation and Development (OECD)— would impose additional compliance costs on companies and force disclosure of sensitive taxpayer information, creating a whole new set of unnecessary business challenges for global companies.
The European Union first proposed that tax information reported to national tax authorities in Europe would not be made public but later reversed this stance. From the U.S. perspective, it’s not hard to conclude that the forced public disclosure of large amounts of company tax and financial information will lead to more aggressive foreign audits and tax assessments that go beyond international tax norms. Furthermore, given the rhetoric surrounding these discussions, U.S. global companies likely will be the primary targets. Moreover, public disclosure of this detailed financial information will substantially increase the likelihood that this information will be used for reasons far beyond determining a company’s tax liability, raising significant competitiveness and security concerns for U.S. companies.
Manufacturers believe that a fair and transparent tax climate helps boost standards of living and economic growth everywhere. In contrast, requests for much more information than needed to assess a company’s tax liability, coupled with the public disclosure of this tax and financial information, will threaten economic growth and competitiveness on a global basis.