BEPS and country-by-country reporting: a step closer towards formulary apportionment?

Transparency represents today a key issue on the agendas of international and domestic tax policy makers. Improving the access and the exchange of relevant tax information and removing existing bank and tax secrecy regimes is currently seen as the most effective tool, together with the identification of harmful tax regimes and practices, to counter both tax evasion and harmful or aggressive tax competition. Action item13 of the BEPS Action Plan suggests to reform the structure of the transfer pricing documentation and introduce a new reporting requirement in the form of a countryby-country reporting template. Although such new reporting requirement is meant to provide an informative tool for the up-front identification of transfer pricing risks within the group, its unexpected area of application may become the improvement of the global acceptance of the formulary apportionment idea for the allocation of multinational enterprises’ profits. This article aims to provide a critical review of the proposed template and assess its potential in reviving the debate on formulary apportionment. Keywords: BEPS, taxation of MNE’s, country-by-country reporting, tax transparency, formulary apportionment