21 February 2014

Comments on OECD Discussion Draft on Transfer Pricing Documentation and CbCR: GFIA, Insurance Europe

GFIA and Insurance Europe support the OECD's efforts to enhance transparency towards tax authorities, on the basis of the principle of disclosure of information, in order to enable tax authorities to have a better view of multinational groups as a whole.

GFIA comments

The GFIA supports the principle of disclosure of information to tax authorities and providing them with a high level risk assessment tool that gives tax authorities around the world a better view of multinational groups as a whole.

The GFIA’s understanding is that the draft CbCR template is to be used by tax authorities as a risk assessment tool. GFIA believes that the level of detail proposed in the current draft goes beyond what is needed for effective risk assessment and may significantly increase the compliance burden on insurance companies.

Flexibility in compiling the CbCR template is needed in order to avoid a disproportionate compliance burden on the insurance sector. In our view granting such flexibility will still enable tax authorities to carry out a high level risk assessment.

In developing the CbCR standard, a uniform global solution is needed. Inconsistent national or regional tax information rules would lead to duplicate reporting, excessive costs and complex system designs for tax authorities and insurance companies who operate with scarce resources.

GFIA-comments

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Insurance Europe comments

Insurance Europe believes that the objectives of improving transparency and of reducing the compliance burden for business should both be at the very heart of this initiative. With respect to the compliance burden, the OECD should to take account of all existing reporting requirements that Multi-National Entities (“MNEs”) face and the information tax authorities currently have before imposing new reporting requirements on insurance companies.

The draft CbCR template was designed to provide tax authorities with relevant information in order to conduct an efficient risk assessment. Insurance Europe believes that the level of detail proposed in the draft goes beyond this objective and is concerned that this will significantly increase the compliance burden and costs faced by insurance companies.

It is Insurance Europe’s strong view that the OECD should permit flexibility in compiling the CbCR template in a number of respects. In particular, the insurance sector should be given flexibility in:

• using either a “bottom-up” or a “top-down” approach in their CbCR template;
• disclosing aggregate financial information on an entity or country basis, and
• preparing their master file on a group-wide or business line basis.

Insurance Europe believes that granting such flexibility would decrease the compliance burden of insurance sector while still enabling tax authorities to conduct efficient risk assessment.

Insurance Europe upholds that in developing TPD standard to combat tax avoidance, a global standardised solution is needed, given that tax avoidance is a global issue. As such, any measures addressing this issue should also have a global reach. National and/or regional tax information rules lead to duplicate reporting, excessive costs and complex system designs for tax authorities and insurance companies alike and should therefore be avoided as much as possible.

It should be stressed that this risk of overlapping and inconsistent reporting requirements is real, as there are currently a number of ongoing initiatives in the area of CbCR. For instance, in addition to the OECD proposal, the European Parliament has recently proposed to consider the introduction of CbCR to large undertakings when reviewing the accounting directive in 2018. For instance, in addition to the OECD proposal, the European Parliament has recently proposed to introduce CbCR for large undertakings. Ensuring consistency between these different initiatives should be a priority for all policy makers involved in these discussions.

Insurance Europe believes that confidentiality needs to be maintained. It has to be noted that the proposed CbCR template containing detailed group-wide information will be disclosed to all countries with different level of data protection. In our view, in order to ensure confidentiality of data the information should not be distributed to local tax authorities unless it is relevant the local tax position. This being said, it is important the CbCR is delivered as a separate document.

Full position paper

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