Call from OECD to build trust between tax administrations and multinational enterprises

The OECD has called for increased efforts to build trust and improve communication between tax administrations and multinational enterprises (MNEs), in order to achieve effective taxation of large businesses.

A new report from the OECD, Tax Morale II: Building Trust between Tax Administrations and Large Businesses includes the findings of a survey of more than 1,200 tax officials from 138 jurisdictions on MNE behaviour and tax compliance. The OECD says the results provide an important snapshot of current levels of trust and transparency – factors that will underpin the success of the new international tax rules.

The survey results show that while MNEs are generally seen to demonstrate a formal commitment to cooperation with tax administrations, notably through on-time payment, perceptions of MNE transparency and trust in the information provided by them are less positive.

The report reveals strong regional differences, with tax administrations’ perceptions of MNE behaviour generally poorer in Latin America and the Caribbean, and to a lesser extent Africa, when compared with Asia and OECD countries.

The study also finds that tax administrations’ perceptions of the behaviour of the ‘big four’ professional services networks (Deloitte, EY, KPMG and PricewaterhouseCoopers) on tax matters are mixed. It shows positive perceptions of their willingness to follow the letter of the law and formal compliance, but less positive perceptions of following the spirit of tax laws.

The OECD identifies a range of possible actions to help build more trust and effective relationships between tax administrations and business, with the aim of fostering more responsible business conduct in the tax area. These include increasing accountability for behaviour of both businesses and tax administrations, supporting the development of cooperative compliance relationships and, more simply, focusing on making communication easier to reduce misunderstandings.

“While there are many factors that can influence MNE tax compliance, trust and the relationship between tax administrations and taxpayers is a useful place to start,” commented Grace Perez-Navarro, deputy director of the OECD Centre for Tax Policy and Administration. “This new OECD work puts forward a range of actions to help both tax administrations and businesses improve communication and build the trust that is necessary to discourage aggressive tax planning and bring about more effective voluntary compliance.”