The European Commission wants large companies to publicly disclose key business information such as the profits they make in different EU countries. The move comes in the wake of the Panama papers revelations, which have increased political pressure to address tax dodging.

Multinational companies, which operate in the European Union and have global annual revenues of more than 750 million euros, should have to disclose key information on their activities to the general public, the European Commission said in a proposal on Tuesday (April 12).

More than 6,000 companies, representing 90 percent of the global turnover of multinational companies, will have to provide details on taxes paid, taxes due, profit before tax, turnover, number of employees, the nature of their activities and accumulated earnings.

The practice, known as country-by-country-reporting (CBCR), shall apply in all EU countries in which the company operates. For non EU-countries, the principle of CBCR has not been chosen. Instead, companies will have to disclose only the total figure of taxes paid outside the EU.

However, Jonathan Hill, the EU commissioner responsible for the proposal, explained that if a company does business in a jurisdiction classified as a tax haven by the Commission, it will also have to give detailed information on its activities in that country.

“And we have also decided that if they are paying taxes outside the EU, in countries, in jurisdictions that don’t abide by international good governance standards on tax, that multinationals would have to publish the same detailed information as for a European country,” Hill said at a press conference.

“So if large multinationals, active in Europe, are paying tax in somewhere like Panama, to take one example, they’d need to make that public.”

According to an EU official, the CBCR for businesses in tax havens was not included in the previous drafts of the proposal, but was added after the Panama papers revelations.

But although the proposal was sharpened, it still met with some scepticism.

Organised opacity

BusinessEurope thinks the proposal goes too far and that it could damage investments in the EU.

Those advocating more tax transparency are also critical. Green EU parliamentarian Philippe Lamberts argued that multinationals will still be able to hide in tax havens. (audio in French)

“It is not about imposing a reporting country-by-country, but to simply ask it for the 28 EU member states. And in the initial proposal, there was a 29th column for the rest of the world. In which they [the Commission] put, in the same sack, tax havens of the whole world. In other words, we organise opacity,” Lamberts said.

He also criticized the fact that that the threshold is much higher than the one defined for banks in previous legislation. Whereas EU banks with an annual turnover above 40,000 euros must publish information regarding their profits, the new regulation, once amended, will target multinationals with a turnover of at least 750 million euros.

“And I do not see that banks have disappeared or faced major issues since they have to tackle this new regulation,” Lamberts added, explaining that less than 50 percent of EU banks have so far complied with the new demands on tax transparency.

The Commission will agree with member states and the Parliament on a black list of tax havens in the upcoming six months. When the EU executive published such a list last summer, it was taken off the Commission website due to heavy criticism.

NGOs argued that many real tax havens, including European jurisdictions such as Switzerland, had not been included.

Eurodad, an NGO calling for more tax transparency, is sceptical about the new proposal and fears that many countries, which they consider as tax havens, will not be on the list.

Citizens get less information than authorities

The general public will also know less than tax authorities. While the public will get the seven pieces of information mentioned above, tax authorities will get 12 pieces of information, including details about assets and capital kept abroad.

According to Commissioner Hill, this is done in order to protect European businesses and their competitiveness.

“I think that some of the more detailed information being exchanged between tax authorities in the future does contain information that a competitor, were it to be made publicly available, might be able to use to their advantage,” Hill said.

The proposal will now be handed over to EU member states and the European Parliament, which will have to find a common position, a task that may prove difficult.

While the European Parliament has been calling for public CBCR, EU member states have been much more reluctant.

Author: Andreas Liljeheden, Euranet Plus News Agency

Further image credits: (middle 1) Jonathan Hill at plenary session in Strasbourg on April 12,2016 / ec.europa.eu

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Euranet Plus News Agency listening tip

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