Country by country reporting: a guide

Richard Murphy of Tax Research UK:

It would require a statement of each and every country in which the company operated.

And it would require disclosure of the names of its subsidiaries operating in those places.

Then it would require a description to be supplied of what each subsidiary does in sufficient detail to understand this with reasonable accuracy.

After that for the country as a whole it would require disclosure, if the OECD template were to be followed (and there is no reason why it has to be, but let’s assume it is for the time being) of the following data for each country in which the group operates, with the data to be supplied on a consolidated basis:

1) Third party sales i.e. those to real customers

2) Intra-group sales i.e. those to companies in the same group

3) Profit before tax

4) The current tax charge accrued for the year i.e. the anticipated tax arising on the profit for the year

5) The tax actually paid in the year

6) The total number of employees engaged, on average, in the year

7) The capital engaged in the country, split between share capital and retained reserves.

It’s not tax information; it is accounting information.  CBCR shows:

  • the relative importance of different markets to the company
  • if the company operates in tax havens
  • whether the use of tax havens was artificial (e.g. if a company makes use of a location like Cayman, but appears to only make intro-group sales from it and has high profits in that location but no tax due and almost no employees and only limited assets)