Part Two: FACT’s 2023 Springboard for International Tax and Tax Transparency Reforms

Pt. 2 – Tax Transparency Calendar

This second blog in a two-part blog series will discuss the rapidly evolving landscape in international tax transparency for large multinational organizations, and why 2023 is the year that FACT is pushing the United States Securities and Exchange Commission (SEC) to use its current authority to advance public country-by-country tax and operations reporting (PCbCR) to address critical information gaps facing investors, policymakers and other users of financial statements. 

In 2022, international and domestic developments have fundamentally changed the question of whether PCbCR by large multinationals of key tax and operating data will ever occur to the questions of how such reporting will occur and when it will begin. Australia is set to become the first nation to require full PCbCR when it resumes its legislature in February, and the current Aussie proposal is broad enough to cover many U.S. multinationals with Australian operations. The Financial Accounting Standards Board (FASB), which creates U.S. generally accepted accounting principles (GAAP), is also set to release a new tax disaggregation proposal in Spring 2023 for comment. 

Building off increased shareholder momentum, FACT is calling on the Securities and Exchange Commission (SEC) to use its current authority to initiate a rulemaking process to require large U.S.-filing multinationals to provide greater insight into the tax and geopolitical risks associated with their international operations. Through public country-by-country reporting (PCbCR) of where multinationals generate third-party and related party revenues, income (or loss), invest in tangible assets and employees, and accrue and actually pay income taxes, investors may better allocate capital and other users of financial statements may engage in improved global efforts to create sustainable tax policies. 

This is information that large multinationals are already reporting to tax authorities under OECD agreement, but with respect to which investors, policymakers and other stakeholders remain in the dark. Critically, it is also information that developing countries continue to lack access to due to tax administration constraints, with only three LMIC countries qualifying for automatic exchange of this information according to recent IMF analysis.  Here are some key dates to tune-in for in 2023:

  1. February 2023: Australian Parliament Expected to Legislate First Complete PCbCR Rules, including for certain In-Scope U.S. multinationals

In October 2022, the Australian Treasury’s budget proposal included PCbCR requirements for certain large multinational enterprises (MNEs), requiring reporting for periods beginning as soon as on or after July 1, 2023. Although some details of the proposal will likely be clarified in legislation, it appears that the proposal is broad enough to cover entities headquartered in foreign jurisdictions with taxable Australian contacts (like, the U.S.) and require full PCbCR for all jurisdictions in which a reporting multinational operates. That is in contrast to more limited PCbCR requirements adopted by the European Union (EU) in November 2021, which will also require reporting from U.S. multinationals. 

The Australian Parliament reconvenes this February. We understand that, given the makeup of the Australian Parliament, it is very likely that the PCbCR proposal will make it into law. If so, this would be a huge victory for corporate and tax transparency advocates. FACT previously weighed in on certain technical aspects of the Australian process, and will keep an eye on details as they emerge. 

  1. March 2023: U.S. Financial Accounting Standards Board Expected to Solicit Comments on Revised Tax Disaggregation Proposal

After a years’-long effort to provide greater disaggregation of tax information to investors in financial statements prepared pursuant to U.S. generally accepted accounting principles, the Financial Accounting Standards Board–or FASB–is expected to solicit public comments regarding its latest tax disaggregation proposal around March 2023. We understand the proposal will principally do two things: 

  1. Require country-by-country disclosure of taxes paid (cash taxes) for those five or so jurisdictions in which the most tax is paid; and
  2. Require greater detail in the rate reconciliation table that requires filers to reconcile the effective tax rate the company accrued to the U.S. corporate statutory tax rate of 21%, including for certain international impacts on a country-by-country basis. 

Missing from the FASB proposal is more fulsome information on the country-by-country revenue generated by multinationals–including pursuant to third-party or related party transactions, along with certain other missing operational information compared to what might be required in PCbCR. As I wrote in more detail here and as FACT and others told the SEC Investor Advisory Committee in December, country-by-country revenue information, in addition to the reforms proposed by FASB, is critical as investors and other users of financial statements seek to understand how multinationals operate internationally and engage in tax planning that might create attendant risks to capital or tax systems globally. 

Nonetheless, the FASB proposal could represent a huge step forward in transparency, and FACT will be working with investors and other stakeholders to comment on the proposal when it is released.   

April/May: Annual Meetings Start for Large Corporations

  It is no wonder that FASB and Australia are paying increased attention to tax transparency in 2023 as investor and multinational action in 2022 brought PCbCR into the spotlight. 2022 saw a couple of key firsts:

  1. In a first-of-its-kind shareholder resolution, Amazon shareholders pushed the tech giant to engage in PCbCR. The SEC sided with investors when Amazon tried to reject the shareholder initiative, and eventually 21% of independent investors supported the measure, which was also supported by GlassLewis and Monrnigstar. These actions even turned SEC Chair Gary Gensler’s head, and he has indicated increased interest in PCbCR (and FASB’s efforts). Similar resolutions followed at Cisco and Microsoft, with increasing success.
  2. Two extractive giants–Newmont Mining and Hess Corporation–became the first U.S. multinationals to voluntarily engage in PCbCR. 

Already in 2023, this trend is continuing. In early May 2023, shareholder proposals asking for PCbCR will be voted on at Exxon, Conoco, and Chevron–led by FACT Coalition member, Oxfam. Ultimately, company-by-company victories are not the goal of PCbCR, however, which is meant to create more uniform disclosure throughout the market. In light of international developments, FASB’s proposal, and clearly increasing investor momentum, however, these proposals are yet another indication that the time is now for the SEC to ensure that:

  • investors and other users of financial statements in U.S. markets have access to consistent, readily comparable information regarding the international tax and operating risks facing SEC-reporting multinationals; and
  • multinationals reporting to the SEC can rely on a single, best-in-class reporting standard from the SEC to minimize compliance burdens when comparing a growing myriad of reporting obligations. 

In other words, the case for SEC action on PCbCR in 2023 has crystallized and FACT will work toward pushing the agency to begin a rulemaking process in the coming months. 


The conclusion to Part 1 of this blog series bears repeating: 2023 promises to be a very busy year for FACT and our allies as we continue to push for international tax reform that curbs improper incentives for multinationals to engage in tax dodging and tax transparency that can support healthier markets and smarter tax systems. We look forward to working with many of you in these fights: feel free to reach out and get involved.