STRASBOURG, France (UPDATED) – The EU unveiled plans Tuesday, April 12, to force the world’s biggest multinationals to fully report earnings and pay their fair share of taxes, saying the Panama Papers scandal added to the need for change.
The European Commission, the EU’s executive arm, said under the new rules big companies operating in Europe would have to make public what they earn in each member state of the 28-nation bloc.
Country-by-country reporting has for years been a major demand of tax activists who accuse big corporations of secretly shifting profits from major markets to low tax jurisdictions, often through the use of shell companies such as those exposed in the Panama Papers leaks.
“The Panama Papers have not changed our agenda but strengthen our determination to make sure taxes are paid where profits are generated,” EU Financial Services Commissioner Jonathan Hill told a news briefing at the European Parliament in Strasbourg, France.
Longstanding criticism of corporate tax policy blew up into the open with the Lux Leaks scandal in 2014, which exposed the secret sweetheart tax deals given to huge corporations –including the likes of IKEA and Pepsi – by the small duchy of Luxembourg.
Hill is Britain’s representative on the Commission and a close political ally of Prime Minister David Cameron, who is under pressure in London for family links to an offshore fund exposed in the Panama Papers.
“This proposal is a simple, proportionate way to increase large multinationals’ accountability on tax matters without damaging their competitiveness,” the Commission said in a statement.
The Brussels-based Commission said corporate tax avoidance in Europe cost an estimated 50 to 70 billion a year in lost tax revenues
The EU plan closely follows recommendations by the OECD agreed by G20 leaders last year. They would apply to all global companies with sales worth 750 million euros or above worldwide and with activities in the EU.
The EU said this amounts to about 6,000 companies – including 1,000 Asian firms – or 90% of all corporations above that size.
Under the new conditions, companies will need to disclose information such as total sales, the nature of their business activity, profit before tax, tax actually paid and accumulated earnings. The data would be posted on a company’s website.
“The proposal has been carefully calibrated to ensure that no confidential business information would be published,” the commission added.
The plans also include a commitment to establish an EU-wide blacklist of tax havens.
But in a disappointment to tax campaigners, the EU plan is largely limited to activity in Europe, except if earnings come from a black-listed tax haven.
“As long as the proposal doesn’t cover all countries, multinational corporations will still have plenty of opportunities to hide their profits,” said Tove Maria Ryding, a tax specialist at the European Network on Debt and Development.
“So instead of solving the problem, this proposal would be moving the problem from one country to another, with multinationals still able to avoid taxes,” she said. – Alex Pigman, AFP/Rappler.com