1. European Commission Taxation and Customs Union 11 Taxing Multinational Corporations: Addressing Transfer Pricing and Cross Border Tax Avoidance Thomas Neale, Head of Unit, Company Taxation Initiatives European Commission DG Taxation and Customs Union 8 December 2010

2. European Commission Taxation and Customs Union 2 Interested Parties and the Commission European Commission – Consultations/Communications/Legislation/Technical support Council (EU Member States) – support via Conclusions & individually European Parliament – Reports, funding, pressure G20 – Provide impetus for action OECD – Transfer Pricing, Task Force, Guidelines Global Forum – Peer Review process on Transparency & EoI IASB –Accounting Standards – and effect on IAS Regulation Other Donors – ITD, ITC, IMF, World Bank –coordination? NGOs – lead, lobby, pressure Tax collectors – Countries – eg USA on extractive industry payments to governments by country Taxpayers - Companies – provide info and lead or follow on CbCR?

3. European Commission Taxation and Customs Union 3 Background EU has a long standing policy on tackling tax evasion and harmful tax competition, both within the EU and beyond. Key element of this EU strategy is the promotion of the principles of good governance in the tax area – transparency, exchange of information and fair tax competition. Communications -‘Promoting Good Governance in Tax Matters’ [April 2009] & ‘Tax and Development - Cooperating with Developing Countries on Promoting Good Governance in Tax matters’ [April 2010] EU action focuses on encouraging and supporting developing countries to adopt and implement international standards in the tax area.

4. European Commission Taxation and Customs Union 4 Transfer Pricing Transfer Pricing – goods and services provided between related companies should be priced at arm’s length – very difficult to monitor – technical assistance important. EC encourages research on innovative approaches to the implementation of the OECD transfer pricing guidelines by developing countries [eg assistance by other countries in applying rules or joint tax audits by developing countries' administrations]. EC considers strengthening of assessment capacities in tax administrations of partner countries is necessary regarding the application of the arm's-length principle. EC commissioning a Study on transfer pricing in developing countries [for June 2011 – EP funding].

5. European Commission Taxation and Customs Union 5 Country by country reporting Country-by-country reporting (CBCR) standard for multinational corporations – view that if companies were required to publish data ‘country by country’ tax collection would be easier. More research needed. Public consultation on CBCR [closes 22 Dec. 2010]; then Communication on CBCR by September 2011. Amendment of the TOD Directive? Company Law Directive? COM supports ongoing work being done by the OECD with respect to CBCR - to be in revised OECD Guidelines for Multinational Enterprises and Principles of Corporate Governance?. COM supports current research work by IASB on possible inclusion of CBCR in IFRS - ‘notably’ for extractive industries.

6. European Commission Taxation and Customs Union 6 Conclusions COM promotes the principles of tax good governance, and supports developing countries by: Technical cooperation to developing countries committed to the principles of good governance in the tax area to:  enable them to conclude and implement TIEA and, where appropriate, DTC; (Transparency - no secrecy - and exchange of information crucial to fighting ‘tax havens’)  Supporting the adoption and implementation of the OECD transfer pricing guidelines in developing countries  Capacity Building Research and Communication on CBCR – plus legislation? Working with the other interested parties