Contributors
Isabel Verlinden
Senior Partner
Belgian tax magazine Tijdschrift voor Fiscaal Recht (https://www.tfrnet.be/) invited Noema to share our thoughts on Cooperative Compliance & Tax Transparency. Below is a summary of our review.
Key takeaway:
Tax Directors have a tremendous opportunity to help crafting a solution together with tax authorities and legislators ensuring comfort when managing the tax function.That’s less than certainty and they may feel it is too early.... But why not thinking it through and consider action?
Reasons are:
1. Pleasing every tax authority simultaneously is a balancing act:
- Taxing multinational enterprises (MNEs) is inherently cross-border, with multiple tax authorities pursuing different priorities.
- Authorities are bound to their own jurisdictions, leading to risks of double taxation, under-taxation, and disputes.
- Current instruments (joint audits, arbitration, DAC7 frameworks) exist but are slow, resource-intensive, and often too late to address tight business timelines.
2. Cooperative Compliance as a Solution
- Cooperative Compliance (CC) offers a framework for real-time, trust-based dialogue between MNEs and tax authorities.
- To be effective, CC must:
- Cover the entire tax spectrum (corporate, transfer pricing, and indirect taxes), not just one silo.
- Operate at group level with a Tax Control Framework (TCF), despite upfront costs.
- Ensure mutual trust and transparency as the foundation of discussions.
3. Benefits& Practicalities
- While a TCF may appear burdensome, the one-time investment is offset by long-term efficiency, risk reduction, and clarity.
- CC fosters a sustainable relationship of respect between companies and tax authorities; this offers fertile soil for thorough discussions, avoiding years of litigation.
- It also has the potential to strengthen a company’s positioning with public stakeholders (customers, investors, regulators) by demonstrating purpose, accountability, and hence fuel corporate citizenship.
4. Transparency – Between Substance and Politics
- OECD’s CbCR (Country-by-Country Reporting) is a robust tool for high level risk assessment.
- Public CbCR (pCbCR) initiative adds little fiscal-technical value; its rationale is rather political but companies understand the direction of travel: vulgarisation of information that readers may or may not be capable of interpreting based on solid tax technical arguments.
- Transparency should be about quality, not quantity of data. Simply publishing more reports does not equal trust.
- Taxes are inherently part of a company’s “license to operate” and societal contribution. That’s plausible to companies.
5. Broader Context & Risks
- Global tax reform (OECD Pillars 1 & 2) shows the difficulty of aligning international policy with politics.
- Growing fiscal pressure from the (fragmenting) geopolitical and economic climate will likely intensify scrutiny of MNEs.
- Proactive risk management is essential: dematerialization, new value drivers, and stakeholder expectations all make reactive approaches untenable.
6. A great opportunity for Boardroom level involvement… what are the levers?
- Adopt a group-level Tax Control Framework: an upfront cost with long-term stability.
- Engage proactively in Cooperative Compliance where available; anticipate future expansion at EU/global level.
- Frame taxes as part of CSR strategy: communicate clearly how tax payments reflect value creation and societal contribution.
- Prepare for higher transparency demands: not just from tax authorities, but also from investors, customers, and regulators.
- Leverage tax governance as a competitive advantage: clarity and predictability in tax matters enhance reputation, investor confidence, and risk resilience.
Bottom line:
CooperativeCompliance, when embedded in group-wide governance, is not just about avoiding disputes—it is a strategic tool for risk management, stakeholder trust, and long-term value creation in an increasingly complex tax landscape.
