Assessing Tax Risk by “Country-by-Country Reporting”

Abstract

Aggressive tax planning becomes harder to tackle every day; it influences the proper functioning of the market, which needs to be effective, companies to pay taxes in the locations where they really generate profits. It also complicates tax authorities’ tax risk assessment tasks, resulting in national revenue losses. Despite some differences, OECD BEPS Action 13 and the European Law-Directive (EU) 2016/881-mandated that MNEs with a total consolidated group revenue exceeding €750 million must conduct country-by-country reporting (CbCR) as part of transfer pricing documentation, in order to improve tax transparency and reduce profits shifting. With these considerations in mind, the methodology used in this paper will involve analysing the effective implementation of CbCR duties in Italy and Spain, and the objective will be to highlight critical issues and benefits of CbCR obligation to understand its impact on tax administrations tax risk assessment and tax avoidance reduction.