The Nigerian Branch of the International Fiscal Association

  • Exchange of Information Regimes

Exchange of Information regimes are one of the ways by which the OECD hopes to promote tax transparency with the objective of curbing tax base erosion by multinational enterprises and undisclosed  income flows across jurisdictions. Base erosion occurs when an MNE declares all of its taxable Income but biases that income to certain jurisdictions such as its home jurisdiction thus eroding the tax base of other countries. CEO’s of MNE’s have been known to publicly declare that they would prefer to pay tax to their own country as a patriotic act to assist their own country to pay for schools, hospitals and infrastructure. Base erosion is in principle completely different from tax evasion.

Fig 1 – Graphic Base erosion

CountryActual incomeReported incomeBase erosion

Since the implementation of automatic exchange of information (‘AEOI’) commenced in 2016, Nigeria has issued its own domestic AEOI legislations – the Income Tax (Country-by-Country Reports) Regulations and the Income Tax (Common Reporting Standards) Regulations. At this level Nigeria appears entirely compliant. CRS was a multi-lateral response to US unilateral FATCA. FATCA was driven by the discovery of the scale of US citizens avoiding US taxes using obliging foreign jurisdictions (Swiss bank scandals).

On the 8th of July 2020 the OECD, for the first time, released new analysis of data gathered from information provided in Country by Country Reports on the economic activities of about 4000 MNEs from 26 countries and operating in 100 jurisdictions. This data disclosed is aggregated and anonymised .

At the OECD level, the information gathered is used amongst other things, for a comparative analysis of the corporate tax revenues in developed and developing countries across jurisdictions. At this level, the OECD are looking for general trends. But at the specific country level this information should be used to search for base erosion and it would appear that at the practical level Nigeria has been delinquent, perhaps not appreciating the opportunity provided.

Exchange of information (CRS)  and country by country reporting (CbCR)  appear similar but they serve different purposes and are driven by different political agendas.

We need to ask: whose interests does CRS  serve and how fit for purpose are the EOI instruments for  countries  like Nigeria? Are there any amendments to CRS that Nigeria should be seeking?  What are the opportunities to identify base erosion that are presented by Country by Country Reporting and is Nigeria taking full advantage of them? These are some of the issues we shall be discussing at our event.