UK tipped to follow EU and Australia on public country-by-country tax reporting

Steven Porter and Abigail McGregor of Pinsent Masons were commenting ahead of the inaugural reporting period under the EU public country-by-country (CbC) reporting regime this summer and after Australian law makers adopted similar legislation in late 2024.

The OECD recommended CbC reporting as a means of increasing transparency over multinational companies’ tax affairs as part of a wider base erosion and profit shifting (BEPS) package of measures, designed to prevent multinational companies from shifting profits to low tax jurisdictions and exploiting mismatches between different tax systems so that little or no tax is paid.

While CbC reporting requirements have subsequently been introduced by many OECD countries, the reporting undertaken is not public – it is shared confidentially with the relevant national tax authorities. From this summer, that will change in the EU.

For in-scope businesses, the first accounting period for EU public CbC reporting is that which commences on or after 22 June 2024, with reports to be disclosed in accordance with that regime within 12 months of the relevant year-end on the multinationals’ own websites. It means, in theory, that the first reports prepared in accordance with the EU public CbC reporting regime could be published as early as this summer, and it is expected a significant number will be published by June 2026.

Late last year, law makers voted to adopt a similar public CbC reporting regime in Australia. A new schedule 4 has been added to the federal Taxation Administration Act 1953, establishing a public CbC reportingregime on how much tax multinationals pay relative to their activities in Australia and worldwide, meaning certain financial information that multinationals already must report to the Australian Taxation Office (ATO) will also need to be made public in future.

Schedule 4 sets out who the Australian reporting obligations apply to. It includes where the entity is a member of a country-by-country reporting group during the reporting period; the entity is an Australian resident or a foreign resident who operates an Australian permanent establishment; and the entity’s aggregate turnover for the income year includes income from an Australian source which is AU$10 million (US$6.2m) or more.

Like in the EU, an entity to which the reporting obligations apply must, within 12 months after the end of the relevant reporting period, report to the ATO commissioner in the approved form. This information will then be made available by the commissioner on the federal government website. The first accounting period for the regime is that which commences on or after 1 July 2024.

Information which must be published includes the name of the entity and name of each entity that was a member of the CbC reporting group; a description of the CbC reporting group’s approach to tax; as well as the jurisdiction, a description of the main business activities, the number of employees, revenue from unrelated parties, revenue from related parties that are not tax residents of the jurisdiction, profit or loss before income tax, book value of tangible assets, income tax paid and accrued, and any reasons for the difference between the income accrued and the income tax due.

Australian ministers have the power to specify certain jurisdictions, beyond Australia itself, where information must be reported on a CbC basis. Non-specified jurisdictions can be reported in aggregate. Australian ministers are yet to make this declaration. Penalties apply for failures to publish the required information in time. The penalty is 500 penalty units for each period of 28 days – one penalty unit is currently AU$330 (US$205).

“With the whole EU and now Australia requiring multinationals to produce public CbC reports, there is increasing likelihood that the UK will follow suit, to extend the existing public CbC obligations on banking companies across the wider economy,” Porter said. “With the statutory footing already there, it would not require much, if any, parliamentary time, nor any serious policy considerations.”

McGregor added: “The UK already has on the statute book, a power for the Treasury to make regulations requiring groups to include a CbC report in their group strategy report, which is public already. When the UK left the EU, it promised not to water down OECD commitments made prior to 31 Dec 2020. However, the UK did not promise to introduce public CbC reporting obligations before that date, so the fact the EU has now done so is not directly relevant to or binding on the UK.”