A group of 16 House Democrats has sent a letter to the Financial Accounting Standards Board asking it to require multinational companies to disclose more country-by-country reporting information in their public financial statements about where they pay taxes and book profits.

The lawmakers, led by Rep. Mark Pocan, D-Wis., and Lloyd Doggett, D-Texas, called on FASB to require companies to disclose their taxes and profits on a country-by-country basis. FASB is currently considering expanding disclosures on income taxes. The move comes amid the rollout of country-by-country reporting requirements by the Internal Revenue Service that the U.S. is carrying out in conjunction with the Organization for Economic Cooperation and Development’s plan for combating base erosion and profit shifting, known as OECD BEPS (see IRS opens Country-by-Country Reporting site online).

“In order to address the threat posed by offshore profit shifting to investors and the public, we urge the Board to require multinational corporations to disclose their income, assets, number of employees, and taxes paid on an annual, country-by-country basis,” the lawmakers wrote in a letter to FASB chair Russell Golden on Tuesday. “These standards will implement critical safeguards and mitigate risk for investors and provide policymakers and the public with important data relevant to our national well-being. Companies already use this information internally and report much of it to the IRS, mitigating any alleged compliance burdens associated with such a directive.”

They commended FASB for undertaking its Disclosure Framework project on income taxes as part of its efforts to improve the effectiveness of financial statement disclosures.

They pointed to recent reports estimating U.S. companies hold over $2.6 trillion in offshore accounts, mostly in foreign tax havens. They noted that concerns around corporate profit shifting have led to initiatives such as the OECD BEPS project, along with efforts by the European Union to improve the tax regime in EU member states. They believe FASB’s Disclosure Framework project could provide an opportunity for greater transparency on taxes from U.S.-based multinational corporations.

“These issues are particularly relevant to FASB’s objectives because the limited availability of public data about overseas holdings poses a threat to investors, policymakers and the general public,” they wrote. “Importantly, shareholders face heightened financial risks when they lack access to complete information about a company’s tax strategy, valuation and management approach. A number of large U.S. companies have faced significant questions in recent years over the potential value of their tax liabilities, uncertainty which potentially threatens their investors. Moreover, policymakers require this information to make informed decisions on matters pertaining to taxation, the economy and other critical areas impacting the American people.”

Separately, members of the SEC's Investor Advisory Committee also sent a letter last week to FASB asking the board to require multinational companies to require multinational companies to disclose their taxes and profits on a country-by-country basis.

Capitol building in Washington, D.C.

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Michael Cohn

Michael Cohn

Michael Cohn, editor-in-chief of AccountingToday.com, has been covering business and technology for a variety of publications since 1985.