IDEAS home Printed from https://ideas.repec.org/a/spr/snbeco/v2y2022i9d10.1007_s43546-022-00294-3.html
   My bibliography  Save this article

Consolidated financial statements and global tax policy (OECD BEPS) insights from a multijurisdictional case study

Author

Listed:
  • Thomas Walter Kollruss

Abstract

This article addresses the relationship between consolidated financial statements and achievement of global tax policy objectives (OECD BEPS) against the background of a case study. Major instruments for preventing tax avoidance are strongly linked with consolidated financial statements. Irrespective of the accounting standard applied (IFRS, US GAAP, and German GAAP), a systematic gap in the group accounting regulations regarding the effective inclusion of entities without members and shareholdings in the consolidated financial statements can be shown. This applies to foundations that are set up as structured entities. The non-inclusion of such legal entities in the consolidated financial statements considerably jeopardises the information function and the core objectives of group accounting. Furthermore, the tax policy goals of the European Union (EU) or Organisation for Economic Co-operation and Development (OECD) to combat cross-border profit shifting and tax avoidance (BEPS) are negatively affected, as relevant instruments such as the interest limitation rule according to Art. 4 of the Anti-Tax Avoidance Directive (ATAD) are linked to the consolidated financial statements. In addition, the hybrid mismatch rule under Art. 9 ATAD is affected, as their scope of application relates to entities that are fully included in consolidated financial statements drawn up in accordance with the IFRS or the national financial reporting system. The same applies to CFC taxation under Art. 7 ATAD, which is based on the concept of control of the foreign entity (majority of the voting rights, capital interest or more than 50% of the profits). The effectiveness of the inclusion rules of the group accounting regulations has a significant international tax policy dimension and superior economic relevance. Thus, the study develops solutions to include structured foundations and entities without members in the consolidated financial statements. Furthermore, solutions for the further development of the OECD base erosion and profit shifting instruments connected to group accounting are presented to achieve global tax policy goals.

Suggested Citation

  • Thomas Walter Kollruss, 2022. "Consolidated financial statements and global tax policy (OECD BEPS) insights from a multijurisdictional case study," SN Business & Economics, Springer, vol. 2(9), pages 1-17, September.
  • Handle: RePEc:spr:snbeco:v:2:y:2022:i:9:d:10.1007_s43546-022-00294-3
    DOI: 10.1007/s43546-022-00294-3
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s43546-022-00294-3
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.

    File URL: https://libkey.io/10.1007/s43546-022-00294-3?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Kovermann, Jost & Velte, Patrick, 2019. "The impact of corporate governance on corporate tax avoidance—A literature review," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 36(C), pages 1-1.
    2. Lynne Oats & Penelope Tuck, 2019. "Corporate tax avoidance: is tax transparency the solution?," Accounting and Business Research, Taylor & Francis Journals, vol. 49(5), pages 565-583, July.
    3. Akira Matsuoka, 2021. "The new international tax regime: analysis from a power-basis perspective," SN Business & Economics, Springer, vol. 1(5), pages 1-23, May.
    4. Preetika Joshi, 2020. "Does Private Country‐by‐Country Reporting Deter Tax Avoidance and Income Shifting? Evidence from BEPS Action Item 13," Journal of Accounting Research, Wiley Blackwell, vol. 58(2), pages 333-381, May.
    5. Preetika Joshi & Edmund Outslay & Anh Persson & Terry Shevlin & Aruhn Venkat, 2020. "Does Public Country‐by‐Country Reporting Deter Tax Avoidance and Income Shifting? Evidence from the European Banking Industry," Contemporary Accounting Research, John Wiley & Sons, vol. 37(4), pages 2357-2397, December.
    6. Michael E. Bradbury, 2018. "Commentary on the Adjustments Required for Intercompany Transactions when Equity Accounting Under IAS 28," Australian Accounting Review, CPA Australia, vol. 28(1), pages 140-147, March.
    7. Taisia Nistorenco, 2019. "Compliance with Disclosure Requirements under IFRS 3 of Companies Trading at Prague Stock Exchange," European Financial and Accounting Journal, Prague University of Economics and Business, vol. 2019(2), pages 5-26.
    8. Julia Zicke & Florian Kiy, 2017. "The effects of accounting standards on the financial reporting properties of private firms: evidence from the German Accounting Law Modernization Act," Business Research, Springer;German Academic Association for Business Research, vol. 10(2), pages 215-248, October.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Yahaya, Mohammed Baba & Oon, Elaine Yen Nee & Jusoh, Ruzita, 2024. "CEO Duality and Bank Tax Avoidance: The Moderating Role of Risk Committees - An International Evidence," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 74(1), pages 73-104.
    2. Göttsche, Max & Habermann, Florian & Sieber, Sebastian, 2024. "The materiality of non-financial tax disclosure: Experimental evidence," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 54(C).
    3. Elayan, Fayez A. & Pacharn, Parunchana & Li, Jennifer & Brown, Kareen & Chen, Yijia, 2023. "The market response to mandatory disclosure of payments to foreign governments," The British Accounting Review, Elsevier, vol. 55(6).
    4. De Simone, Lisa & Klassen, Kenneth J. & Seidman, Jeri K., 2022. "The effect of income-shifting aggressiveness on corporate investment," Journal of Accounting and Economics, Elsevier, vol. 74(1).
    5. Müller, Raphael & Spengel, Christoph & Weck, Stefan, 2021. "How do investors value the publication of tax information? Evidence from the European public country-by-country reporting," ZEW Discussion Papers 21-077, ZEW - Leibniz Centre for European Economic Research.
    6. Subagio Efendi & Salim Darmadi & Robert Czernkowski, 2022. "Are Financial Institutions Tax Aggressive? Evidence From Corporate Tax Return Data," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 25(2), pages 175-204, August.
    7. Tang, Wenliang & Yang, Mian & Duan, Hongbo, 2023. "Temperature and corporate tax avoidance: Evidence from Chinese manufacturing firms," Energy Economics, Elsevier, vol. 117(C).
    8. Laudage, Sabine, 2023. "The BEPS Project: Achievements and remaining challenges," IDOS Policy Briefs 22/2023, German Institute of Development and Sustainability (IDOS), Bonn.
    9. Katarzyna Anna Bilicka & Elisa Casi & Carol Seregni & Barbara Stage, 2021. "Tax Strategy Disclosure: A Greenwashing Mandate?," CESifo Working Paper Series 9030, CESifo.
    10. Alfred Tran & Wanmeng Xu, 2024. "A study of cross‐border profit shifting channels: Evidence from Australia," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 64(1), pages 869-901, March.
    11. Müller, Raphael & Spengel, Christoph & Vay, Heiko, 2020. "On the determinants and effects of corporate tax transparency: Review of an emerging literature," ZEW Discussion Papers 20-063, ZEW - Leibniz Centre for European Economic Research.
    12. Nabavi Pardis & Nordström Martin, 2023. "The Impact Assessment of Implementing a Global Minimum Tax for MNEs in Sweden," Nordic Tax Journal, Sciendo, vol. 2023(1), pages 111-123, December.
    13. Belnap, Andrew, 2023. "The effect of intermediary coverage on disclosure: Evidence from a randomized field experiment," Journal of Accounting and Economics, Elsevier, vol. 75(1).
    14. Ding, Rong & Sainani, Sushil & (John) Zhang, Ziyang, 2021. "Protection of trade secrets and corporate tax avoidance: Evidence from the inevitable disclosure doctrine," Journal of Business Research, Elsevier, vol. 132(C), pages 221-232.
    15. Song, Qian & Holland, Kevin, 2023. "The quality of tax accounting for financial reporting purposes: International evidence from the United Kingdom," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 52(C).
    16. Athira, A. & Ramesh, Vishnu K., 2023. "COVID-19 and corporate tax avoidance: International evidence," International Business Review, Elsevier, vol. 32(4).
    17. Habib Saragih, Arfah & Ali, Syaiful & Suwardi, Eko & Utomo, Hargo, 2024. "Finding the missing pieces to an optimal corporate tax savings: Information technology governance and internal information quality," International Journal of Accounting Information Systems, Elsevier, vol. 52(C).
    18. Makoto Hasegawa, 2023. "Territorial Tax Reform and Profit Shifting by US and Japanese Multinationals," National Tax Journal, University of Chicago Press, vol. 76(4), pages 771-804.
    19. Petr Janský, 2023. "Corporate Effective Tax Rates for Research and Policy," Public Finance Review, , vol. 51(2), pages 171-205, March.
    20. Luca Menicacci & Lorenzo Simoni, 2024. "Negative media coverage of ESG issues and corporate tax avoidance," Sustainability Accounting, Management and Policy Journal, Emerald Group Publishing Limited, vol. 15(7), pages 1-33, February.

    More about this item

    Keywords

    Consolidated financial statements; Tax policy; Tax avoidance; Profit shifting; OECD BEPS;
    All these keywords.

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • K34 - Law and Economics - - Other Substantive Areas of Law - - - Tax Law
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:snbeco:v:2:y:2022:i:9:d:10.1007_s43546-022-00294-3. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.