Multinationals should disclose tax information in each country they operate, say MEPs

Large firms must make information about the tax they pay in each country in the world, publicly available, MEPs said after a debate and vote in the European Parliament plenary on Tuesday.

They backed a proposal requiring multinationals to report their tax bills on a country-by-country basis – with possible exemptions in the case of commercially-sensitive information.

The aim of the measure is to increase tax transparency by providing the public with a picture of the taxes paid by multinationals, and where those taxes are paid. Public access to tax information Under the proposed measures, the income tax information of multinational firms with worldwide turnover of EUR 750 mln or more would be published in a common template in each tax jurisdiction in which the firm or its subsidiary was operating. This data would be available for free and made publicly accessible on the website of the firm.

The company would also be responsible for filing a report in a public registry managed by the European Commission. The information would include: - the name of the firm and, where applicable, the list of all its subsidiaries, a brief description of the nature of their activities and their respective geographical location; - the number of employees on a full-time equivalent basis; - the amount of the net turnover; - stated capital; - the amount of profit or loss before income tax - the amount of income tax paid during the relevant financial year by the firm and its branches resident for tax purposes in the relevant tax jurisdiction - the amount of accumulated earnings - whether undertakings, subsidiaries or branches benefit from a preferential tax treatment

MEPs also supported measures to protect commerciallysensitive information by allowing member states to grant exemptions from the requirement to provide one or more pieces of information. These exemptions would be renewed annually and would only be applicable in the jurisdiction of the member state granting the exemption.

Once a member state grants an exemption, it must inform the EU Commission confidentially about the omitted information, together with a detailed explanation for the exemption.

Every year, the Commission will publish on its website a list of firms which were granted exemptions and a succinct explanation why.

Parliament also supported amendments which would set limits on exemptions won by firms on providing their tax information. One obliges companies who lose their eligibility for an exemption to immediately make the omitted data publicly available. Firms will also have to apply for a renewal of their exemption, annually.

In addition, at the end of the non-disclosure period, the firm must publish its tax details retroactively “in the form of an arithmetic average” to cover that period when they did enjoy immunity from providing details.

After approving the draft report by 534 votes to 98 votes, with 62 abstentions, MEPs voted to send the report back to the Committees to start negotiations in 1st reading on the basis of a plenary mandate.

The proposals are a bid to crack down on corporate tax avoidance, which is estimated to cost EU countries EUR 5070 bln a year in lost tax revenues, according to the European Commission.

After the vote, co-rapporteur Evelyn Regner

(S&D, AT) said: “If we don’t make country-by-country reporting, we will never bring to light the system of letterbox-companies that is abused to shift profits and avoid taxes worldwide. We are ready now for negotiations with the Council to find a common reporting regime; the EU must lead the fight against tax avoidance.”

Co-rapporteur Hugues Bayet (S&D, BE) added, “Each euro of tax which is not paid by the multinationals is a euro too much paid by the individual.”

The EPP Group, the biggest parliamentary bloc, welcomed the outcome of the vote on new tax transparency rules for multi-national companies. “We want transparency. We want to shed light on the unfair profit shifting practices of certain companies. We are fighting tax avoidance without discriminating against European companies,” said Dariusz Rosati MEP, the EPP Group’s negotiator of the new law.

According to Rosati, the new rules protect European companies: “The fight against tax avoidance will be in vain if we damage the competitiveness of our companies and the investment climate in the EU. Unfortunately the Socialists have been trying to cripple European entrepreneurs in their quest to score political points”, Rosati said.

The EPP Group successfully advocated a safeguard clause which provides that European companies which are in direct competition to non-European companies may ask for exceptions to the disclosure of certain detailed information. Such exceptions need to be justified to and approved under strict conditions by the European Commission every year. This safeguard clause was adopted.

Rosati hopes that these new European tax transparency rules will set an example for other countries. “This new law will pave the way for greater transparency, also on an international level. The EPP Group hopes that other countries will follow these steps”, Rosati said.