OECD BEPS Action Plan 13 Transfer Pricing Documentation: Country-by-Country Report, Master File, and Local File

Taxing power is an essential sovereign right, but that authority has been complicated by increasingly interconnected markets, and highly mobile capital. Moreover, radically different perspectives among the world’s developed economies on taxation paired with sophisticated tax avoidance strategies by multinational firms contributes to a complex international tax regime that raises the specter of taxing some income too much, and some not at all. The OECD has attempted to lend greater clarity to this miasma with its BEPS initiative and associated action items. One of these items, action 13, would impose a three-tiered reporting requirement on multinational firms. While this development may provide taxing authorities greater insight into large multinational firms, it is far from a costless endeavor. It will impose new burdens on firms, while potentially leading to the exposure of the sensitive, proprietary information firms will be compelled to disclose. Despite these costs, many nations are moving forward with implementing these policies, which will unavoidably subject U.S. firms with interests in those jurisdictions to the new reporting requirements irrespective of legislative or regulatory action in the United States.

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