Amid a crackdown on tax avoidance, the European Union has backed new rules requiring the extractive industries to disclose payments made to governments on a country-by-country basis.
Ministers backed the rules in Brussels this week following opposition from EU countries with strong interests in the oil and gas sector, such as the United Kingdom, EURACTIV can reveal. The Netherlands was also blocking the deal before a sudden U-turn in which it expressed full support.
The revision of the Transparency Directive will require European extractive and logging companies to present a more detailed picture of the payments they make to governments on an individual country basis rather than a global total. This goes beyond a recent, much-trumpeted revision of the Accounting Directive in that it requires all EU listed companies to disclose their payments.
The European Parliament’s legal affairs committee approved the amendments yesterday (30 May) putting the EU legislative on course for a final vote on 12 June.
The lawmaker who drafted the rules, British MEP Arlene McCarthy, said: “This is a major step forward in the global fight against corruption. The new rules will ensure that citizens of resource rich countries can hold their governments to account for the exploitation of their natural resources.”
In its final draft, the Parliament rejected a proposal by the European Commission to include criminal exemptions, fearing companies could use them as a loop-hole.
Large oil and gas companies had lobbied the EU legislature claiming that laws in certain countries they operate in may prevent them from disclosing all of their tax payments, putting the lives of their workers at risk. But none of the companies were able to supply any evidence to support the claim, an EU source said.
Parliamentarians feared that in the time it took for the EU to ratify the new rules, multinationals would have lobbied governments to change their taxation disclosure laws, exploiting the criminal exemptions clause.
The tough new rules on extractives followed a deal cut with centre-right and right-wing groups in the European Parliament who, along with a block of countries in the Council of Ministers, opposed extending the laws to other sectors.
The revision of the Transparency Directive comes amid accusations of tax avoidance directed towards some of the world’s largest multinationals, such as Google, Apple and Starbucks.
The commissioner for the EU's internal market, Michel Barnier, told the Financial Times: “It is necessary that large companies such as Apple, Google, Amazon that we have recently spoken a lot about – but not only these – are obliged to report how much tax they pay to whom and where.”
Apple does not disclose the income tax it pays in various countries where it operates.
The rules are also expected to put pressure on multinationals using countries with low corporate tax such as Ireland or Luxembourg as bases for their European operations.