The new reporting rules were proposed three years ago to crack down on tax dodging after the Panama Papers scandal broke | Boris Roessler/AFP via Getty Images Luxembourg leads charge against EU tax transparency Effort to force global companies to publish tax details torpedoed in Brussels.

Luxembourg on Thursday successfully spearheaded an effort to block a draft bill that would force multinational companies to publish where they pay taxes and make profits.

The new reporting rules were proposed three years ago to crack down on tax dodging after the Panama Papers scandal broke.

Tax-dodging companies deprive national coffers of between €50 billion and €70 billion a year, the European Commission said when laying out the so-called public country-by-country reporting directive (CBCR), which would target companies with global revenues exceeding €750 million a year.

But Luxembourg, Cyprus, Ireland and Malta were among 12 governments to torpedo the draft plans at a meeting of EU industry ministers in Brussels.

That opposition was large enough to deny the bill the qualified majority it needed to pass Thursday’s vote. A successful outcome would have kickstarted talks with the European Parliament to find a final compromise legal text.

Luxembourg and the other opposing countries argued the bill could upset global talks to develop a digital tax. They also maintained the plans should only be handled by finance ministers — not by the industry and employment chiefs present at Thursday’s Competitiveness Council session, which handles policies related to the EU internal market and industry.

Finnish Employment Minister Timo Harakka, who chaired the negotiations under Helsinki’s six-month Council presidency, didn’t buy the argument.

He said he was also far from shocked that the four countries, which anti-poverty NGO Oxfam earlier this year accused of being tax havens, were a part of Thursday’s opposition.

“No one is surprised that Luxembourg, Malta, Cyprus and Ireland are among those that oppose this motion,” Harakka said in an interview following the meeting. “Ironic is hardly the word.”

Thursday’s outcome also drew criticism from anti-corruption NGO Transparency International.

“It’s an outrage that Member States have once again put the interests of big business above those of citizens,” Elena Gaita, Transparency International's senior policy officer, said in a statement.

“Everywhere across the EU we see that the public is unhappy about multinationals, like Starbucks and Amazon, hiding the tax that they pay in countries they operate in,” she added. “National governments have effectively just denied people access to this information.”

Tax vs. accounting

Luxembourg's Finance Minister Pierre Gramegna traveled to Brussels to reject the Council bill in person on the grounds that the reform is legally related to tax and should be handled by him and his peers.

The legal distinction between tax and accounting matters in Brussels. A tax initiative requires the support of all 28 governments before it can become EU law and bans the European Parliament from the drafting process.

Until the Competitiveness Council took up the bill, finance ministers had left CBCR to gather dust after the same legal dispute over the initiative proved too difficult for them to agree on.

Finland’s Council presidency tried to break the deadlock by bringing CBCR to the Competitiveness Council as an accounting file — sidestepping finance ministers in the process.

“I must tell you, it feels a little bit awkward for me to be speaking here on a directive, which I have personally negotiated and voted [on] three years ago,” Gramegna said during the televised Council meeting.

“Maybe we should involve those that drafted the directive, namely the Ecofin [meeting between finance ministers],” he added.

Countries like Finland, France and Spain, meanwhile, side with the Commission’s decision to propose CBCR as an accounting bill. That legal basis needs a qualified majority of 16 countries to pass in the Council and includes the Parliament in the legislating process.

“I want to make clear that this is not a tax file, at all,” Harakka said. “It is a competition issue. Aggressive tax planning is something that is harmful to competition.”

But Luxembourg's Gramegna was in good company. Prior to Thursday's vote, he had issued a joint statement — obtained by POLITICO — together with Cyprus, the Czech Republic, Estonia, Hungary, Ireland, Latvia, Malta, Slovenia and Sweden to make the point.

Croatia, which will take over the Council presidency from Finland in January, and Austria also voted against the bill during the meeting.

Furthermore, forcing multinational companies to publish their corporate and tax details could anger the U.S. and have a negative impact on international talks to agree on a digital tax, Gramegna said.

“We know perfectly well that large countries like the United States and Japan totally oppose public information on these issues,” he said. “At this time, we are trying to reshape the whole landscape of taxation.”

He added: “We would disrupt it by accepting this."

Harakka described that argument as “perplexing.” He highlighted the sorry state that global diplomatic relations currently find themselves in, as U.S. trade tensions with the EU and China weigh on the world’s economy.

“The U.S. is not too interested in what Europe thinks about its tax reforms,” he said. “I believe that tax transparency and ethical and sustainable business that we conduct here in Europe has a very strong competitive edge.”

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