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This note was prepared as a part of the research project ‘Staying One Step Ahead of Tax Evasion’.
In a nutshell
Context:
Following the OECD/G20 BEPS project (2013–2015), Country-by-Country Reporting (CbCR) became a mandatory standard for large multinational enterprises (MNEs). While originally designed as a confidential administrative tool for tax authorities to detect aggressive tax planning, these reports have evolved into a primary resource for analyzing global corporate activity.
Objective:
This note illustrates the transition of CbCR from a compliance-only tool to a crucial resource for evidence-based policymaking and economic research. It explores the dual nature of CbCR data access: the anonymized aggregate statistics published by the OECD and the confidential micro-data accessed by researchers under strict legal safeguards.
Key Insights:
• Scale & Sensitivity: Studies using CbCR microdata have quantified global profit shifting and revenue losses, documenting that profit shifting is highly sensitive to tax rate differentials.
• Policy Evaluation: CbCR data serves as the primary "laboratory" for simulating the impacts of the Pillar Two Global Minimum Tax, proving that coordinated international tax reform could curb revenue loss.
• Social & Distributional Impacts: Innovation in research has linked CbCR data to
labor and wealth records, revealing that corporate profit shifting doesn't just impact government budgets, it also reduces worker earnings and contributes to wealth inequality.
• Methodological Maturity: While early reporting faced challenges like the double-counting of intra-group dividends, researchers and the OECD have established rigorous cleaning protocols. This makes CbCR a more comprehensive alternative to traditional commercial databases for studying the behavior of the world's largest multinationals.
Conclusion:
The evidence reviewed in this note highlights an established track record
for the analytical use of CbCR data. The coordinated efforts of international organizations to publish aggregated statistics, alongside controlled research access to microdata, demonstrate that CbCR is a functional tool for economic analysis. These examples suggest that significant insights into global profit allocation and tax policy can be generated effectively while fully adhering to the fundamental principles of taxpayer confidentiality.