In recent months, the NAM criticized some of the recommendations coming out of the Base Erosion and Profit Shifting (BEPS) plan spearheaded by the Organisation for Economic Co-operation and Development, particularly new information disclosure rules that will force companies to disclose sensitive business information and impose additional and unnecessary compliance burdens on them.
Country-by-country reports, which U.S. multinational companies will file with the IRS, clearly will impose a significant administrative burden on companies. On a positive note, however, these reports will be submitted to foreign countries by Treasury under bilateral treaties and information exchange agreements, ensuring confidentiality, consistency and appropriate use of the information by foreign countries.
While the NAM continues to have concerns about the compliance burden of country-by-country reports, we recognize the challenges facing U.S. multinational companies competing in the global marketplace and the critical need for guidance from Treasury on filing these reports. Today we submitted comments on proposed guidance issued by Treasury earlier this year.
While we welcome guidance on country-by-country reports, we remain extremely concerned about another disclosure requirement in the BEPS recommendations—the master file. The master file, which would include sensitive, proprietary information about a company’s global operations, could be required directly by any country where a company does business, even if the information is unrelated to actual taxpayer activities in the country requesting the information. Unlike the country-by-country report, the master file information is not subject to any confidentiality, consistency or appropriate use conditions beyond those that may apply locally. We urge the IRS and Treasury to provide adequate safeguards for master file information, such as withholding reports from jurisdictions that abuse master file documentation requirements or fail to keep master file information confidential. This would give the federal government the same tools to protect master file information as it has to protect country-by-country reports.
When it comes to tax policy, a fair and transparent tax climate in the United States, including competitive business tax rates and modern international tax rules, will boost standards of living and economic growth worldwide. At the same time, an appropriate balance needs to be struck between transparency and confidentiality of the proprietary information that enables companies to compete and prosper in a global economy.