Strengthening Country-by-Country Reporting to Fight Tax Avoidance

By Mary Ongore (Legal Manager, Sustainable Finance, ILP), Carter Cheng (Former Legal Fellow, ILP), and Yogi Bratajaya (Legal Fellow, ILP) 

Photo credit: "Euro and Magnify Glass" by Images_of_Money is licensed under CC BY 2.0. 

Every year, governments around the world lose between USD 100 and 240 billion in revenue to tax avoidance, amounting to as much as ten percent of global corporate tax revenues. This loss of revenue hits Global South countries especially hard, as it limits their ability to invest in vital infrastructure, public services like education and healthcare, and essential social protection programmes that support vulnerable communities. 

The OECD/G20 BEPS (Base Erosion and Profit Shifting) Project was established in 2013 to counteract this: one of its key goals is to make the global tax system more transparent. A big part of this effort is Action 13, which introduced Country-by-Country Reporting (CbCR). This requires large multinational enterprises (MNEs) to share basic information about their operations in every country they operate in—including how much money they make, how many people they employ, and how much they pay in taxes. This helps tax authorities see where companies are earning profits and whether they are paying taxes in the right places. The idea is simple: if companies are open about their finances, it becomes harder for them to shift profits to low-tax countries to avoid paying their fair share. Action 13 is a minimum requirement for all countries that are part of the Inclusive Framework on BEPS—a global group set up in 2015 to make sure both developed and developing economies can work together to fight tax avoidance and improve tax rules. 

While important progress has been made, the limited and selective sharing of Country-by-Country (CbC) Reports means that developing countries often do not benefit from them. This blog explores these challenges and calls on tax justice advocates to push for the public release of CbC Reports during the ongoing negotiations on the United Nations Framework Convention on International Tax Cooperation (UNFCITC). This aligns with ILP’s Sustainable Finance programme, which supports partners across multiple countries in advancing progressive fiscal reforms at international forums. 

How Profit Shifting Works 

MNEs operate across many different countries. To reduce the amount of tax they pay, some shift their profits to countries with very low or no corporate taxes, even if the actual business activities happen elsewhere. For example, an MNE could have offices in both Country A (with high taxes) and Country B (with low taxes). Even though most of its products are made and sold in Country A, the MNE could report its profits in Country B. This way, it pays less tax overall, even though the real work is happening in Country A, the high tax country. This practice is called profit shifting, and it is one reason why many governments are pushing for fairer and more transparent global tax rules. 

The harm goes beyond lost revenues. Domestic businesses, which do not have the option of shifting profits abroad, face unfair competition. They carry a heavier tax burden while global giants benefit from sophisticated tax avoidance schemes. The result is an uneven playing field that undermines local economies and weakens public trust. 

CbCR: A Flawed Tool that Locks out the Global South 

While CbCR could help ensure that corporations pay their fair share of taxes, there is a significant impediment that hinders CbCR’s effectiveness: the CbC Reports are confidential. At present, these reports are only shared between tax authorities – mostly in wealthier countries – while many developing countries are left out. This is because the OECD/G20 has set up a complicated system that effectively limits who can access these reports.  

First, to access CbC Reports, countries must become a state party to international agreements like the Multilateral Convention on Mutual Administrative Assistance in Tax Matters. So far, only 23 African countries have joined this convention. While there are alternative ways to access these reports - such as through Tax Information Exchange Agreements (TIEAs) or Double Tax Agreements (DTAs) - many Global South countries have limited DTA and TIEA networks. Thus, Global South countries lack the necessary framework for making requests to access CbC Reports. 

Second, even when Global South countries have the legal framework to request the CbC reports, they often lack the technological infrastructure required to receive and store the reports securely, since they must be transmitted through encrypted systems. This further limits their ability to receive these reports. 

Finally, tax authorities in Global South countries cannot simply ask companies operating in their jurisdiction for these reports. Instead, they must file a request for the CbC Report with the tax authorities of the country that the MNE is headquartered in and wait for them to pass the CbC report along. This means that there can be significant delays in receiving this vital information.   

Why Public Disclosure Matters 

Making CbC Reports public would significantly advance efforts to combat tax avoidance. MNEs, which benefit from the infrastructure, workforce, and business environment of the countries where they operate, would be held accountable to giving back by paying taxes where their profits are actually earned. Ensuring equitable tax collection also means also means that domestic businesses would compete on a more equal basis, rather than being disadvantaged by MNEs that can shift profits abroad. 

Investors, too, would benefit from transparency. Public reporting would give them a clearer picture of a company’s operations, risks, and governance quality, while also signalling long-term stability and alignment with global sustainability standards. 

Most importantly, public disclosure has already been proven workable. Companies operating in the extractive industry are subject to the Extractive Industries Transparency Initiative, which requires disclosure of key financial data. The European Union has adopted a Directive requiring public CbCR and Australia has also introduced its own system. Some claim that disclosure would damage competitiveness or reveal trade secrets; however this does not withstand scrutiny. The data in question—revenues, profits, employee numbers, and taxes paid—is not commercially sensitive.  

Why Now Is the Moment 

For Global South countries, the debate over public disclosure is essential to ensure fiscal survival. Many Global South countries are facing mounting debt crises and are spending more on debt repayments than on healthcare or education. At the same time, they are on the frontlines of climate change, with shrinking fiscal space to respond to natural disasters and other urgent needs. 

Public services are under immense pressure, and citizens are demanding better schools, hospitals, and infrastructure. Corporate tax is a vital source of revenue particularly for developing countries given few alternative revenue sources. When billions are lost through profit shifting, governments are left without the means to respond to these urgent demands.  

The Way Forward   

The implementation of CbCR in OECD’s BEPS Project Action 13 gave authorities and other stakeholders an important tool to hold MNEs accountable for tax avoidance. However, the confidentiality of CbC Reports leaves Global South countries on the margins, unable to utilise this important tool. The UNFCITC that is currently being negotiated offers a chance to do better. Transparency is already identified as a core principle in this process. Advocates, including civil society organisations and forward-looking governments, should push for the inclusion of public CbCR in this emerging legal framework. 

The public disclosure of CbC Reports is not just a technical adjustment to global tax rules. It is a matter of justice. Transparency is imperative in ensuring that MNEs pay their fair share and contribute to the societies that sustain them. By making the reports publicly accessible, Global South countries would finally be able to claim the resources they need to build fairer, stronger, and more resilient economies. 

At ILP, our mission is to advance economic and environmental justice and the rule of law through the provision of pro bono legal services to civil society, governments, and communities. In the context of CbCR, ILP can support its partners through legal research that explores how public disclosure can be integrated into global frameworks. We can also develop position papers to strengthen the arguments of negotiators and civil society actors involved in the UNFCITC discussions. To collaborate with ILP or seek support on advancing tax transparency, please do contact us: contact@internationallawyersproject.org.