April 27, 2016
The Honorable Jack Lew
Secretary of the Treasury
United States Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, DC 20220
Dear Mr. Secretary:
On behalf of Business Roundtable, I am writing to urge the Treasury Department and the Internal Revenue Service (IRS) to accept country-by-country (CbC) reports for taxable years beginning on or after January 1, 2016.
The United States has played a crucial role in the recently completed G20/Organization for Economic Cooperation and Development (“OECD”) Base Erosion and Profit Shifting (“BEPS”) project. One of the key actions emanating from this project is the implementation of a CbC reporting regime.
Under the proposed regulations, sharing of CbC information by the United States with foreign governments is pre-conditioned on a requirement that the information be treated as confidential by the recipient government. Business Roundtable supports the provisions in the proposed regulations that would suspend the exchange of information with a foreign jurisdiction that is not in compliance with confidentiality requirements, data safeguards, and appropriate use standards.
Our concern about confidentiality arises because, under the BEPS agreement, countries may impose a “secondary reporting” requirement if a multinational’s home country does not implement a CbC reporting regime. Secondary reporting could result in a multinational company having to undertake local filing of the information in a foreign jurisdiction or to designate a surrogate foreign entity to file on its behalf. Importantly, the information reported
under a secondary reporting requirement may not have the same confidentiality safeguards that would exist if the information were reported to the IRS and exchanged by the IRS with other countries pursuant to a tax treaty or tax information exchange agreement. Secondary reporting may also result in a multinational having to comply with multiple local or surrogate country CbC reporting requirements, which could differ from those of the United States, thus increasing administrative burden and cost.
Many countries have already implemented CbC reporting for 2016, including secondary reporting. Currently, the United States does not require CbC reporting for calendar year taxpayers in 2016. Rather, the proposed regulations that are to be finalized shortly are expected to require CbC reporting for tax years beginning after June 30, 2016. If there is no CbC reporting for U.S. headquartered calendar year taxpayers in 2016, there is a risk that foreign countries may try to impose secondary reporting on these companies, putting the confidentiality of their information at risk.
The risk to confidentiality and the administrative costs can only be avoided by the IRS accepting CbC reports for U.S. headquartered companies for all of 2016. It is, therefore, vital that the Treasury Department and the IRS prioritize resources so that the IRS can accept CbC reports for taxable years beginning on or after January 1, 2016.
Business Roundtable stands ready to assist the Treasury Department and the IRS in implementation of these important rules.
On behalf of Business Roundtable, I appreciate your attention to this matter.
Sincerely,
Mark A. Weinberger
Global Chairman and CEO
EY
Chair, Tax and Fiscal Policy Committee
Business Roundtable
MW/mm
C: Mark Mazur, United States Department of the Treasury
Robert Stack, Jr., United States Department of the Treasury
John Koskinen, Internal Revenue Service