Total Tax Contribution – A study of the largest companies in the EU, EFTA & the UK
The tax landscape is changing. There is a lack of trust in large business and a concern that globalization has benefitted large companies rather than the population at large.
The concern is particularly acute around the taxes paid by the largest companies. As governments in the European Union (EU), the European Free Trade Association (EFTA) and the United Kingdom (UK) strive to balance the need to raise revenues with a desire for a tax regime that attracts and retains business and encourages it to grow, a broad range of stakeholders is asking whether companies are paying their ‘fair share of tax’ and requires more transparency.
There is limited data to inform the debate over the contribution of large business in taxes. Besides taxes that companies pay as taxpayers, they are also responsible for collecting taxes on behalf of for instance their employees, clients, and service providers, and pay them to governments. However, there is little visibility over these other business taxes.
In order to collect relevant data to help inform the debate, the EBTF commissioned in 2018 the EU/EFTA/UK EFTA Total Tax Contribution (TTC) Study. The purpose of the study is to raise awareness and aid understanding of the contribution of large business in the EU, EFTA and UK.
The study follows PwC’s TTC framework; an established methodology that allows organisations to measure all the taxes that they pay, the taxes they collect on behalf of governments, and other contributions they make to the wider economy. The framework applies to any tax regime and, as used in other studies (e.g. the UK 100 Group Total Tax Contribution study) has been discussed with governments and other stakeholders around the world. PwC acts as a ‘black box’ ensuring anonymity of data and building of a robust database.
Tax Transparency and Country-by-Country Reporting Study
In anticipation of the increase of public tax disclosure requirements, the 2020 TTC study also contained a chapter analysing the Country-by-Country Reporting (CbCR) data of participating companies.
Since then, the international and European landscape on public tax disclosures and substantive tax rules has fundamentally shifted. The EU has introduced public CbCR; the Inclusive Framework has agreed on a minimum tax of 15% on the basis of the Pillar Two initiative led by the OECD; and the European Commission has announced the possibility of requiring the public disclosure of the Pillar Two ETRs calculated under the Pillar Two Model Rules. These developments have supported the commissioning of a separate and stand-alone study on CbCR data, following the successful launch of the 2021 TTC study on 17 December 2021.
This study aims at potentially aiding a constructive and objective discussion amongst the various stakeholders on how tax transparency can be achieved in an effective, meaningful, and balanced way.