Country-to-country financial reporting bill passed in Senate

The Base Erosion and Profit Shifting (BEPS) Inclusive Framework (Country-by-Country) Reporting Bill, 2023 was passed in the Senate on Tuesday.

Finance Minister Colm Imbert said the bill was part of government’s initiative to assist with compliance with one criteria of the list of non-co-operative jurisdictions for tax purposes of the European Union.

The bill’s full title is An Act to provide for the Country-by-Country Reporting (CBCR) by Multinational entities relative to the Base Erosion and Profit Shifting Inclusive Framework and to provide for matters related thereto.

BEPS refers to the action whereby multi-national enterprises (MNEs) register their companies in countries with low taxes in order to avoid paying taxes in countries with higher taxes where they earn their money. Country to country reporting enables governments to track what taxes MNEs are paying and where, as the enterprises are required to submit reports to the governments.

Imbert said he would be circulating amendments based on comments from the Organisation for Economic Co-operation and Development (OECD) which had changed from the last time TT had undergone a review by the OECD, which he described as shifting goalposts.

“Once our network is in place, we will be recipients of information on the multi-national corporations that operate in TT, and this will help us determine if any of them are evading taxation.”

He said in March, the OECD’s global forum secretariat would be in TT to conduct an on-site mock peer review visit, following which government would be notified of its shortcomings and be given recommendations by the end of May, which they hoped to implement before the actual official Phase 2 peer review in June of 2024, with the results being received in September 2024. He expected to be compliant or largely compliant by December 2024.

The bill has 22 clauses, which lay out the filing and notification obligations of MNEs to the Board of Inland Revenue (BIR), the definition of an eligible MNE, the time frame for filing, the details of what the reports should contain, and the provision that the information gathered can be used for compliance and enforcement but should be kept confidential.

The bill requires that MNEs keep records for six years. It said the registrar general’s department would use the information given to determine whether enterprises were registered in TT for tax purposes, and to submit the list of registered companies to the BIR every six months.

The bill details the penalties and procedures for dealing with errors, fake reports, hindering or obstructing the BIR in collecting information, and altering, destroying, mutilating, obliterating, hiding or removing a country-by-country report.

The Finance Minister said an eligible MNE was one which earned more than the equivalent of US$850 million or 750 million Euros.

Imbert said the bill will help with TT’s investment rating and its relationship with foreign banks.

“We will impose penalties for those MNEs in our society which are not in compliance. These entities will have to comply, the world has changed. The tax authorities will be to ascertain if someone is cheating. It is a way for us to do our own tax assessments.

“Hopefully the OECD requirements don’t evolve again and we can make our amendments by June and move on to implementation.”

Opposition Senator Wade Mark asked why government took so long to bring the legislation to Parliament. He asked whether government would also be introducing transfer-pricing legislation in conjunction with the reporting legislation, as a 2018 UN ECLAC report said TT lost an estimated $8-$13 billion owing to not having such laws in place.

He asked whether the eligible MNEs would include the ones who were based in TT. He said the BIR should be the one to make regulations and not the Finance Minister.

Mark said he supported the bill and would submit amendments to strengthen the legislation.

Independent Senator Anthony Vieira said the bill seeks to address the ability of MNEs and MNCs to adjust prices in their subsidiaries to avoid paying taxes. He said it offers the opportunity to collect money that can be used for the people of TT.

“People complain about property tax, but the flight of money to tax havens permeates the economic life of many countries. It is theft on a grand scale and misuse and abuse of the system. It makes it difficult to raise fiscal revenue and affects net revenue distribution.”

Opposition Senator Jayanti Lutchmedial questioned the commitment of the government to getting TT off the EU blacklist. She said the European Union Council, in its The Council conclusions on the revised EU list of non-cooperative jurisdictions for tax purposes issued on Tuesday, said,

“Trinidad and Tobago does not have a rating of at least “largely compliant” by the global forum for exchange of information on request, has not signed and ratified the OECD multilateral convention on mutual administrative assistance as amended, has harmful preferential tax regimes (free zones), does not implement the BEPS minimum standard on country-by-country reporting and has not resolved these issues yet.”

Independent Senator Hazel Thompson-Ahye said she hoped the increased responsibility being given to the BIR would also come with an increase in staff and training. She said in cases where errors were made, the time period for correction should be more than 14 days.

Government senator Allyson West said the bill would not magically lead to an increase in tax collection, as the measures would have to be implemented. She said the bill wasn’t brought to Parliament before as a knowledgeable tax authority needed to be in place, which was being filled by the TT Revenue Authority.

“The legislation will tell us where international companies in TT are operating, what they are being charged, and we will have the ability to assess their tax liabilities properly. We will also require our locally based multi-nationals to comply with this legislation, which will let us better assess the taxes due from local and foreign based MNEs. But unless we have the right approach, it will be another piece of paper, unless we have a robust tax authority.”