Transparency is supposed to be the central issue during the meeting of the G20 finance ministers in Lima on Thursday. Politicians estimate this as key in order to fight against profit shifting by multinationals. The risks are widely ignored – but the potential drawbacks especially for Germany are obvious.
One of the most relevant instruments of the whole BEPS (Base Erosion and Profit Shifting) project is the country-by-country-reporting. According to this multinational enterprises will have to provide detailed financial and tax figures separated by each country. The purpose of gathering all the information is to show the full picture of the company’s global activities in order to ensure a fair taxation.
Who will be allowed to see this full picture? This question will be a subject to be discussed by the G20 finance ministers and was also raised by the European Union as part of a public consultation. While some argue in favour of an access for the public, others emphasize their concerns since companies might lose their competitive advantages when secret company data are known by the public. This means a risk for the future success of the company and, thus, for jobs. Therefore, the information reported should be exclusively used by the experts in the tax authorities.
Furthermore, more transparency should not only prevent cases in which a non-taxation occurs but also double taxation. If German tax officers know the global tax payments of a company they might have to reduce their claims. Or, the tax officers have to agree with their colleagues abroad on how to allocate the profits and tax payments according to the added value. Against the background of the impressive number of multinational companies located in Germany this could end up in tough negotiations with Chinese or Indian tax authorities who want to have bigger shares of the taxable profits.
In the long run, the approach by G20, OECD and EU will therefore not necessarily lead to higher corporate tax revenues in Germany. Moreover, the strong regulation and the increasing red tape burden will cause costs for companies as well as the tax administration. Germany as a location for business would suffer from this.
The German government’s fiscal responses to the Covid-19 pandemic and the Ukraine war in an attempt to cushion their impact have driven up the country’s general government debt-to-GDP ratio.
The Global Tax Expenditures Database (https://GTED.net/) collects national reports on tax expenditures for 101 countries for the period from 1990 to the present. Based on these data, the development of tax expenditures in the 38 OECD countries between 1999 and ...