handbook-tb

Diane Ringin a jurisdiction will be handled for reporting purposes. Presumably,to the extent that the CbC reporting is country-based, the data fromthe PEs should be picked up. But clarification on this point may bevaluable. For example, the enumerated listing of entities operating inthe jurisdiction should include not only local subsidiaries of the foreignmultinational, but also the foreign corporations with a PE in thejurisdiction.Accounting: Second, as initially noted in sections 3.3.3.2 and3.3.5.3 above, countries in general, but developing countries especially,might prefer the top-down allocation of group income to the extentthat they are concerned that use of the local statutory accounts to constructa bottom-up reporting may disguise underlying BEPS problems.If the local statutory accounts reflect inappropriate pricing and profitshifting, that reality might be built into the template responses andeffectively obscure the base erosion and profit shifting. This concern isnot unique to developing countries. But the template may play a morepivotal role in the tax enforcement process of a developing country ifit lacks other reporting mechanisms or information that could signal arisk for BEPS with regard to a particular taxpayer.Verification: Third, although attention has been given to thesource of data used in constructing the files, less attention has beenfocused on verification of the information. Of course, verification ofdata is always an issue for tax authorities. If there are expectationsregarding the ability of a country to verify information, it would beuseful to outline them more specifically. This concern may be mostprominent in the local file context because that information wouldlikely be circulated to a more limited pool of tax authorities. In contrast,the master file and CbC template would likely receive wider circulation.It is not clear, however, whether a jurisdiction that finds themaster file or template inaccurate would be expected to unilaterallyshare that information with other countries in possession of the fileor template.Language: Fourth, the current proposals anticipate that themaster file (and the CbC template) would be prepared in English butthat the local file would be prepared in the local language of the jurisdiction.Certainly, it is likely to be more efficient for the developingcountry that the master file be in English rather than the language of532