After a vote on Monday (12 June) by the European Parliament’s ECON and JURI committees, European multinationals will be obliged publish details of their activities in every country where they operate. But a number of loopholes weaken the tax transparency drive. EURACTIV France reports.
Country-by-country reporting will soon be compulsory for multinational companies based in Europe, but it will not cover all companies all the time.
The position adopted by the European Parliament’s Committee on Economic and Monetary Affairs (ECON) and the Committee on Legal Affairs (JURI) in Strasbourg will force big companies to publish details of their activities in all EU countries, including turnover, profits and taxes paid.
The European Commission made the proposal in April 2016, in the wake of the Luxleaks scandal, with the aim of increasing transparency among big companies with a turnover of more than €750m.
Today in Europe, compulsory reporting only exists in two sectors: the extractive industries and banking. But despite repeated tax evasion scandals in recent years, efforts to broaden the obligation to cover other sectors have struggled to make headway.
Monday’s committee vote, which still has to be validated in the European Parliament’s plenary, marks a significant stride towards the goal of increased tax transparency. Similar measures have been proposed in the past at European level, but none have been adopted.
Yet, the Commission’s proposal contains exemptions that weaken companies’ transparency obligations.
Three political groups – the centrist ALDE group, the centre-right EPP group and the Eurosceptic ECR group – submitted an amendment to allow companies to avoid their transparency obligations if they could prove that publishing the required details would be harmful to their business.
“We are asking for a safeguard clause to protect European businesses outside Europe in certain circumstances,” said Polish MEP Dariusz Rosati (EPP group) ahead of the vote in the ECON committee.
“We want to shed light on the practices of companies that transfer their profits to low-tax countries. But European companies that operate outside Europe should not be obliged to reveal anything unless their competitors face the same obligations,” Rosati added.
Another safeguard included in the Commission’s initial proposal was the lower threshold of €750m annual turnover, below which the obligations do not apply.
These exemptions have been criticised by civil society organisations that have led long campaigns in favour of increased tax transparency.
“If we allow companies to choose whether or not to divulge their information, they will never do it and more scandals will come to light in the years to come. Transparency is vital in the fight against tax evasion and profit shifting. We will never abandon the fight for fair and transparent taxation and we will support this during the plenary vote,” said the centre-left S&D group’s negotiators Evelyn Regner and Hugues Bayet.
“By including these loopholes in the law, MEPs are favouring big multinationals above SMEs and citizens,” said Manon Aubry, a spokesperson for Oxfam France.
Country-by-country reporting has already proved its worth in the banking sector. First implemented in France in 2013 and then rolled out across the EU, public reporting helped reveal the abusive tax optimisation practices of Europe’s big banks.
In March this year, Oxfam published the report Banks in exile, analysing for the first time data from public country-by-country reporting by European banks. The study revealed that certain big banks declare large amounts of profit in tax havens, although their real economic activities in these countries remain small.