handbook-tb

Transparency and disclosure2.2.2 Volume of cross-border businessBoth the number of taxpayers engaging in cross-border business andthe volume of business they conduct have been increasing. Thus, thescale of the base erosion and profit shifting at stake is significant.Correspondingly, the amount of information that countries mustaccess, process and evaluate to stem the loss of tax base is also quitelarge. Mechanisms for providing information to countries must betailored to promote the goal of transparency and understanding.2.2.3 Role of developing countries in the global economyDeveloping countries have experienced significant growth in inboundinvestment by foreign multinationals as well as in outbound activitiesof their own multinationals. Income generated by these MNEs forms acritical portion of the tax base and, as noted in section 2.2.1 above, isespecially susceptible to base erosion and profit shifting tax planning.For all countries facing such base erosion and profit shiftingfrom multinationals, the ability to access and use tax informationis vital. However, developing countries may find that they encounterserious barriers to securing needed information, compared withother jurisdictions. Not only do developing countries often experiencea number of domestic constraints on their ability to access and usetaxpayer information (see section 2.2.4.2 below), they also may findit more difficult to obtain information from other jurisdictions (seesection 2.2.4.3 below). Additionally, to the extent that foreign multinationalspose a greater information transparency and disclosure riskthan domestic ones, developing countries face a distinct challenge.These countries typically have a substantial amount of inbound investmentrelative to outbound and therefore have more foreign multinationaltaxpayers than domestic ones.2.2.4 Informational challenges for developing countriesAs noted in section 2.2.3 above, developing countries are especiallydependent upon corporate taxation of MNEs for their tax base. Tothe extent that MNEs are able to engage in successful BEPS transactions,developing countries typically have fewer alternative tax basesupon which to draw (for example, individual taxes and consumption501