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EU proposes tax transparency for multinationals

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EU proposes tax transparency for multinationals

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Multi-national companies operating in Europe will be required to publish country-by-country information on the tax they pay, according to new proposals announced by the European Commission on Tuesday.

The proposals follows widespread anger at the revelations from the Panama Papers about multinationals' use of tax havens to reduce their tax burden.

The new measures would require public disclosure by larger multinationals – that is, those with annual global revenues above EUR 750 million – of tax information in key areas.

This definition of multinationals is in line with the OECD's approach and covers around 6,500 businesses, and 90% of multinational revenues.

On a country-by-country basis, they would need to publish

  • the nature of their activities;
  • how many staff they have;
  • their net turnover;
  • their profit before tax;
  • the amount of tax due based on yearly profits;
  • the amount of tax they actually paid in that same year; and
  • their accumulated earnings.

The same rules would apply to non-European multinationals doing business in Europe. In addition, companies would have to publish an aggregate figure for total taxes paid outside the EU.

Some multinational can pay nearly a third less tax. Corporate tax avoidance in Europe is estimated to cost EU countries EUR 50-70 billion a year in lost tax revenues.

The proposals should not impact smaller businesses. Indeed Commissioner Jonathan Hill said an important part of the proposals was "the wish to protect the competitive position of SMEs". He added that "it should not be the case that smaller companies, which are not able to shift their profits, or cannot afford clever tax advice to minimise their bills, it is not right that they are at a competitive disadvantage to big multi-nationals."

He said the information multinationals will need to disclose is expected to give a clear idea of whether a large multinational is paying tax where it makes its profits. It would be made available for five years on the company’s website. "Anyone who is interested could see where multinationals pay their tax, and whether there’s, indeed, a level playing field for smaller businesses."

Commissioner for the Euro Valdis Dombrovskis said that "by adopting this proposal, Europe is demonstrating its leadership in the fight against tax avoidance."

The Commission's proposal will amend the Accounting Directive (Directive 2013/34/EU) to ensure that large groups publish annually a report disclosing the profit and the tax accrued and paid in each Member State on a country-by-country basis. This information will remain available for five years. Contextual information (turnover, number of employees and nature of activities) will enable an informed analysis and will have to be disclosed for every EU country in which a company is active, as well as for those tax jurisdictions that do not abide by tax good governance standards (so-called tax havens). The proposal therefore also addresses concerns flowing from the Panama Papers.

The same rules would apply to all multinationals doing business in Europe. In addition, companies would have to publish an aggregate figure for total taxes paid outside the EU.

Further information:

MEMO on public tax transparency rules for multinationals

Communication on public tax transparency rules for multinationals

Information on the Anti-Tax Avoidance Package

Commission memo on the Anti-Tax Avoidance Package


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