OECD releases framework for co-operative tax compliance

The OECD has some advice for multinational corporations: If you are more forthcoming in disclosing your tax positions, you can expect more certainty in their tax treatment. This advice is contained in a new report, Co-operative Compliance: A Framework, which describes how corporations and tax authorities can establish co-operative relationships that will benefit both.

The report addresses how a co-operative compliance model can help “restore trust and confidence in the relationship between business and tax administrations.” In a co-operative compliance programme, large corporate taxpayers and tax authorities “base their relationship on mutual transparency, understanding and justified trust.” The report notes that both parties benefit “when a large taxpayer is ‘in control’ with regard to its tax position, so that they are able to swiftly resolve uncertainty about the tax treatment of certain transactions.”

Many countries have embraced the principle that businesses that are fully transparent can expect certainty about their tax positions. The report concludes that the value of a co-operative compliance model has been established. These benefits include improved efficiency (such as reduced time to resolve issues) and increased revenue collection.
 
The report is based on a survey of 21 members of the OECD’s Forum on Tax Administration (FTA) and discussions with the OECD’s Business and Industry Advisory Committee. It follows up on the FTA’s 2008 report, Study Into the Role of Tax Intermediaries, which examined aggressive tax planning and the relationship among tax authorities, taxpayers and tax intermediaries.

The 105-page report, which was released at the FTA meeting in Moscow on Friday, presents a business case for co-operative compliance approaches and outlines ways to measure effectiveness.

—Alistair Nevius (anevius@aicpa.org) is editor-in-chief, tax for CGMA Magazine.