Leveraging information about ownership networks to improve taxation

Summary

In recent years, there has been considerable attention on how beneficial ownership (BO) information can be used to improve taxation. BO information helps understand the distribution of wealth and assets in a country, and therefore provides insights into the true tax base of an economy. With the implementation of central registers, there is an opportunity for tax authorities to systematically and proactively incorporate the use of BO information into their processes to achieve their aims more effectively.

Information about the beneficial owners of legal vehicles from central registers is essential to understanding BO networks – the networks of relationships between individuals, legal entities, and assets – but it is not the only relevant information to do so. For example, other sources such as information about shareholders and nominees partly constitute and overlap with BO information. Tax authorities may need to rely on multiple information sources to comprehensively understand the ownership and control relationships in a BO network.

This briefing explores how tax authorities can effectively use the BO information of legal vehicles from central registers and other kinds of information relevant to understanding these networks. Information about BO networks helps tax authorities through two main ways: first, by closing the tax gap through better compliance and uncovering hidden assets, revealing the sources or types of income, understanding relationships in transfers of assets, and countering criminal attacks; and second, by helping develop and deliver policy reforms to tax systems, underpinned by better insight and analysis.