Action 12 Mandatory Disclosure Rules

BEPS Action 12 provides recommendations for the design of rules to require taxpayers and advisors to disclose aggressive tax planning arrangements. These recommendations seek a balance between the need for early information on aggressive tax planning schemes with a requirement that disclosure is appropriately targeted, enforceable and avoids placing undue compliance burden on taxpayers.

Action overview

 

What is the issue?

It is important for each jurisdiction to obtain in a timely manner information on the tax compliance and policy risks raised by aggressive tax planning. Action 12 contains recommendations regarding the design of mandatory disclosure rules for aggressive tax planning schemes, taking into consideration the administrative and compliance costs for tax administrations and business and drawing on experiences of countries that have implemented such rules.

 

Why does it matter?

The lack of timely, comprehensive and relevant information on aggressive tax planning strategies is one of the main challenges faced by tax authorities worldwide. This information is essential to enable governments to quickly respond to tax risks through informed risk assessment, audits, or changes to legislation or regulations.

What are we doing to solve it?

The 2015 OECD report on Mandatory Disclosure Rules provides a modular framework that enables countries to design a disclosure regime that fits their need to obtain early information on potentially aggressive or abusive tax planning schemes, as well as the promoters and users of such schemes.  Where a country wishes to adopt mandatory disclosure rules, the recommendations provide the necessary flexibility to balance a country’s need for better and more timely information with the compliance burdens for taxpayers.

The Action 12 report also sets out specific recommendations for rules targeting international tax schemes, as well as for the development and implementation of more effective information exchange and co-operation between tax administrations.

What are the results so far?

With the adoption of Council Directive (EU) 2018/822 by EU Member States, there has been a significant uptake in jurisdictions that now have mandatory disclosure rules. This directive will result in the reporting of cross-border aggressive tax planning, offshore structures and Common Reporting Standard  avoidance schemes to EU tax authorities. The directive incorporates the model rules set out in the 2018 OECD report Model Mandatory Disclosure Rules for CRS Avoidance Arrangements and Opaque Offshore Structures.

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