Diving into the Differences Between Tax Transparency Regimes

Country-by-country reporting (CbCR), developed by the Organisation for Economic Co-operation and Development (OECD), requires large multinational groups to provide aggregate data on income, profits, taxes paid, and economic activity by jurisdiction. This information is shared with taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. authorities to help identify transfer pricing and Base Erosion and Profit ShiftingProfit shifting is when multinational companies reduce their tax burden by moving the location of their profits from high-tax countries to low-tax jurisdictions and tax havens. (BEPS) risks. The OECD’s CbCR was intentionally designed as a high-level risk assessment tool for tax authorities, not as a public measure of profit shifting or tax avoidance.

This year, however, as a response to increased transparency requirements, the EU, Australia, and the US have introduced new transparency requirements.

The EU and Australia have moved beyond the confidential regime established by the OECD to a public CbCR system. Additionally, companies that provide financial accounts following US Generally Accepted Accounting Principles (USGAAP) must disclose jurisdictional tax information, as required by changes from the Financial Accounting Standards Board (FASB). While the FASB standard is not a CbCR regime, it contains some related elements.

These frameworks are often discussed together because they all increase tax disclosure. However, they report different data to different audiences, using different definitions and reporting boundaries.

Additional proposed legislation in the US would create another reporting standard, muddying the waters further. The recently reintroduced Disclosure of Tax Havens and Offshoring Act would require public corporations to provide country-by-country financial reporting on profits, taxes paid, and economic activity, similar to the OECD’s CbCR approach.

These new disclosures come with distinctions between the different reporting standards, presenting significant challenges in terms of cross-source comparability, their relevance for informing policy debates, and overall shortcomings. This abundance of information will create an easily misunderstood picture of multinationals and their activities. The three new regimes are built with different standards and, ostensibly, different purposes. Lining up a company’s US accounts next to its EU country-by-country report, for example, would not provide a coherent multi-jurisdictional picture.

We work through five dimensions on which the regimes diverge—legal character, scope, jurisdictional coverage, timing, and underlying definitions. These comparisons show the disclosures are structurally different and treating them as comparable produces misleading conclusions about economic activity, tax burdens, and other policy-relevant outcomes.

Table 1. Key Aspects of the Four Reporting Regimes

Legal Character and Purpose

ASU 2023-09, a financial-reporting standard issued by FASB in 2023 amending ASC 740, seeks to help investors make better capital-allocation decisions. It is not intended to inform tax authorities or the public. This disclosure focuses on providing more detailed information about an entity’s effective tax rate, income taxes paid, and factors affecting these amounts, particularly entities operating in multiple jurisdictions.

The EU’s Directive (EU) 2021/2101 amends the EU Accounting Directive to create a freestanding report on income tax information that Member States were required to transpose into domestic law by June 2023. Its policy rationale, as framed by the EU and Oxford University’s Centre for Business Taxation, is to put more scrutiny on tax arrangements of multinational entities (MNEs) and improve transparency and fairness, not serve capital markets.

Australia’s regime is closer to the EU model in spirit but is administered differently. It is a standalone obligation with the Australian Taxation Office (ATO), layered on top of the pre-existing confidential country-by-country reporting. It is substantially influenced by the Global Reporting Initiative (GRI) 207, developed to promote greater transparency on an organization’s approach to taxes and contributing to sustainability and public infrastructure.

Scope and Thresholds

FASB’s requirements apply to every entity subject to ASC 740, and there is no revenue threshold. Public business entities (PBEs) must produce a full quantitative, tabular rate-reconciliation, while non-PBEs must provide a qualitative narrative. A mid-sized private US manufacturer and a Fortune 500 company are both “in scope,” even though their actual disclosures differ enormously.

The EU, in contrast, applies a threshold of €750 million ($855.5 million) consolidated revenue over two consecutive financial years to EU-headquartered groups and non-EU groups with a qualifying medium or large EU subsidiary or branch.

Australia’s revenue threshold is AUD 1 billion, roughly equivalent to €611 million or $699.9 million, paired with the condition of at least AUD 10 million of Australian-sourced revenue. A foreign group can clear the global revenue bar and still fall outside Australia’s regime if its local footprint is not substantive.

Jurisdictional Coverage

While the OECD standard aims at complete jurisdictional coverage, FASB rules use materiality thresholds, the EU uses selective disaggregation, and Australia uses specified jurisdictions.

FASB’s rate-reconciliation does not require country-by-country detail like other standards do. Foreign jurisdictions are generally disclosed only when jurisdiction-specific information is sufficiently significant to trigger the disclosures. State and local taxes are disclosed in aggregate, with only a qualitative description of which one or two states drive the bulk of the effect; foreign tax effects are broken down by individual jurisdiction only when that jurisdiction’s impact clears a threshold. If taxes paid in a jurisdiction surpass 5 percent of total taxes paid, then jurisdiction-level taxes paid must be disclosed. Separately, if there is a 5 percentage point difference between the local rate and the US statutory rate, then companies have to disclose the drivers of that difference. For example, a firm would have to give a separate explanation if its tax reduction effect (difference between statutory and effective tax rate) equals or exceeds 5 percent of the amount computed as pretax income times the US statutory tax rate (21 percent). Otherwise, the jurisdictional data goes into an aggregated non-US jurisdiction line.

The EU directive mandates disclosure for a named list of countries that changes over time: all 27 EU Member States, Iceland, Liechtenstein, Norway, and every jurisdiction on the EU’s list of non-cooperative tax jurisdictions. Everything else is lumped into “all other tax jurisdictions” (aggregated). The named list is subject to revision as it includes the EU list of non-cooperative jurisdictions, and the mechanics for the EU’s grey list are subject to change over time.

Australia also uses a named-list approach but with a different list. There are 40 specified jurisdictions, a list that is broader than the EU’s (including Hong Kong, Singapore, and Switzerland), but excludes several jurisdictions, such as Luxembourg, Ireland, and the Netherlands. A group could therefore see a subsidiary’s results broken out in one regime and folded out in the aggregate of another, leading to non-uniform interpretations.

A subsidiary in Singapore, for example, would submit jurisdiction-specific information in an Australian report; however, the subsidiary’s activities would be aggregated in the EU’s “all other tax jurisdictions” list. An analyst comparing the Australian and EU reports for the same country could easily, and mistakenly, conclude that the company scaled back its operations between reporting periods, when the real explanation is simply that the frameworks classify Singapore differently.

Timing

The three regimes will not deliver data on the same clock. FASB’s requirements for PBEs are effective for years that begin after December 15, 2024. Practically, this means the data will be disclosed during filings made early to mid-2026, with non-PBEs following a year later.

The EU directive applies to financial years beginning on or after June 22, 2024, meaning FY2025 is the first in-scope year for calendar-year groups, with reports due within 12 months of the balance-sheet date (the end of December 2026, for most). A handful of Member States, such as Romania and Spain, have set earlier start dates under national discretion.

Australia’s regime applies to income years commencing on or after July 1, 2024, which for a group with a fiscal year beginning on June 30, the first report covers FY2024-25 and is due within one year, by June 30, 2026. For calendar-year groups, the equivalent deadline is the end of December 2026.

A company with a June 29 fiscal year files its first EU public CbCR report for 2024-25. Then it will report on data starting June 2025 under Australia’s July 1 start date.

No two regimes will hand the public a full first-year dataset on the same date. And because fiscal years differ, even “FY2025” data from two regimes may not describe the same 12 months of business activity. This creates room for error in interpretation.

Definitions

A shared limitation is that no regime provides “taxable incomeTaxable income is the amount of income subject to tax, after deductions and exemptions. Taxable income differs from—and is less than—gross income.  .” Every figure in each reporting standard is derived from financial account (“book”) concepts rather than the tax return filed with a revenue authority. FASB’s rate reconciliation compares income tax reported in the financial statements with an amount calculated using pre-tax book incomeBook income is the amount of income corporations publicly report on their financial statements to shareholders. It provides a picture of a firm’s financial performance and follows Generally Accepted Accounting Practices (GAAP). While it is a useful measure for assessing financial performance, it is not useful for assessing tax liability.. Likewise, the EU and AUS public CbCR measures—such as profit or loss before income tax, and income tax accrued—are drawn from audited financial statements. Book income and taxable income are quite different in scope and reason. Tax laws regarding expensing, net operating loss carryforwards, tax credits, and other timing differences create gaps for both. Any analysis based on these disclosures should distinguish between book accounting measures and taxable income.

What makes the data provided under these regimes not comparable is how they’ve defined key accounting measures. FASB’s disclosure regime is designed to explain differences between statutory and effective tax rates rather than report jurisdiction-level revenue, profit, and tax data. The reconciliation should show each of its drivers (e.g., credits, foreign tax rates, non-deductible items, etc.) as a percentage-point impact rather than a dollar amount. This makes it challenging for readers to draw meaningful conclusions on how much tax a company pays on a country-by-country basis.

The EU’s public CbCR definition of turnover includes net turnover, other operating income, income from participating interests and other similar income, and related-party transactions. Australia requires greater disaggregation, with its public CbCR separating revenue arising from related parties outside the jurisdiction.

This will mean that, for example, an automotive parts manufacturer based in Germany will make no distinction between a sale to an internal group and an external third party. If the manufacturer sells engine components for €500,000 internally to a French distributor for €1,000,000, Germany must report the full €1,000,000 as public CbCR revenue, despite it being an intra-group transaction. Even when those components are sold to a third party in Spain for €800,000, Germany’s reported revenue will still include the sale to the related party in France.

This could imply an inflated picture of revenue relative to the profit earned there, offering a distorted view of the company’s economic activity in a jurisdiction.

The ATO also requires reported figures to be reconcilable to audited consolidated financial statements, whereas the EU permits companies to use several possible accounting sources. Different accounting sources are meant for different audiences, and when multiple sources are involved, like in the EU, the requirements leave the data vulnerable to misinterpretation, and reduce comparability across companies and jurisdictions.

Profit and tax definitions also differ. The EU defines tax accrued as current tax expense on taxable profits, excluding deferred tax and uncertain tax positions. Australia uses a broadly similar current-tax measure to the EU but additionally requires an explanation when tax accrued materially differs from the amount recorded, which is a disclosure the EU does not mandate.

Taken together, these differences in required disclosures mean that the same company can legitimately report different revenue, profit, and effective tax rate figures for one jurisdiction, leading to inconsistencies in the perception of commercial activity.

What Could This Mean for the Public?

These structural differences matter well beyond the tax department of an MNE. Policymakers and researchers evaluating taxes in jurisdictions are especially likely to be misled. Combining data drawn from multiple transparency regimes­—without adjusting for discrepancies in scope, timing, jurisdictional coverage, and accounting definitions—will produce unreliable results.

Suppose an analyst compares a company’s Australian public CbCR disclosure, EU public CbCR disclosure, and FASB filing for 2026. Singapore may appear as a standalone jurisdiction in Australia, be aggregated into “all other tax jurisdictions” in the EU report, and not appear separately at all in a FASB tax-footnote disclosure if it does not trigger the relevant thresholds. An apparent change in reported activity could therefore reflect reporting design rather than any underlying business change.

All three regimes are in their first phase of implementation, measuring three different things, on three different clocks. Cross-regime comparisons will require accounting for the prevalent underlying differences.

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