Building mutual trust and improving communications between tax administrations and business is critical for improving voluntary compliance

Effective taxation of large businesses would benefit from increased efforts to build trust and improve communication between tax administrations and Multinational Enterprises (MNEs), according to a new report from the OECD.

Tax Morale II: Building Trust between Tax Administrations and Large Businesses reflects the results of a wide-ranging survey of over 1,200 tax officials from 138 jurisdictions on MNE behaviour and tax compliance.

As the international community prepares for the implementation of a new global minimum tax, the results provide an important snap shot of current levels of trust and transparency—factors that will underpin the success of the new international tax rules.

The survey shows that while MNEs are generally seen to demonstrate a formal commitment to co‑operation with tax administrations, notably through on-time payment, perceptions of MNE transparency and trust in the information provided by them are less positive. There are strong regional differences, with tax administrations’ perceptions of MNE behaviour generally poorer in Latin America and the Caribbean, and to a lesser extent Africa, when compared with Asia and OECD countries.

The survey also reflects tax administrations’ perceptions of the behaviour of the Big Four professional services networks (Deloitte, EY, KPMG, PricewaterhouseCoopers) on tax matters. It shows similar patterns of positive perceptions of their willingness to follow the letter of the law and formal compliance, but less positive perceptions of following the spirit of tax laws.

The report combines tax administration perceptions of MNEs with previous research on MNE perceptions of tax administrations to identify a range of possible actions to help build more trust and effective relationships between tax administrations and business, with the aim of fostering more responsible business conduct in the tax area. These include increasing accountability for behaviour of both businesses and tax administrations (such as through voluntary principles set out by business and taxpayer charters), supporting the development of co-operative compliance relationships, and more simply focusing on making communication easier to reduce misunderstandings.

The report focuses in particular on the challenges faced by developing countries, which are striving to increase revenues to help meet the UN Sustainable Development Goals. With many developing countries being more reliant on both corporation tax and MNEs than other countries, fostering responsible business conduct in the tax area is especially important in developing countries.

“While there are many factors that can influence MNE tax compliance, trust and the relationship between tax administrations and taxpayers is a useful place to start,” said Grace Perez-Navarro, Deputy Director of the OECD Centre for Tax Policy and Administration. “This new OECD work puts forward a range of actions to help both tax administrations and businesses improve communication and build the trust that is necessary to discourage aggressive tax planning and bring about more effective voluntary compliance.”

To access the report, visit www.oecd.org/tax/tax-morale-ii-7587f25c-en.htm.