European Union negotiators have agreed rules to force large multinational corporations to publicly disclose where they make profits and pay taxes in the bloc as part of Europe’s campaign to crack down on corporate tax evasion.
After years of stalled talks, European Union governments and members of the European Parliament struck an agreement on so-called country-by-country tax reporting for large companies operating in the single market and non-EU jurisdictions blacklisted by the Brussels tax haven.
The move has been hailed as a breakthrough in tax transparency and comes as international policy makers step up their demands for renewed rules on corporate taxation. The G7 countries are expected to strike a political agreement later this week on raising the effective minimum corporate tax. rate of 15 percent.
“I am sure this deal on country-by-country public reporting is just the beginning of more tax fairness and financial transparency in Europe,” said Evelyn Regner, the center-left MEP who led the negotiations for the European Parliament.
Under country-specific EU rules, a company that has global revenue of at least 750 million euros for two consecutive years must publicly disclose how much tax it pays in each of the bloc’s 27 member states plus 19 states. Additional jurisdiction considered by EU countries. That the EU be “non-cooperative” tax authorities. Those jurisdictions include “black list” jurisdictions such as Guam and the US Virgin Islands, as well as “grey list” tax havens including Panama, Fiji and Samoa.
Large companies are already obligated to disclose their profits to national tax authorities within the European Union but the information has not been made publicly available.
50 billion euros – 70 billion euros
Estimated annual losses to EU governments from corporate tax evasion
Politicians and tax activists celebrated the agreement as a first step in measuring the extent of corporate tax evasion within the European Union. Brussels estimates that EU governments lose an estimated €50 billion to €70 billion annually due to corporate tax evasion.
The agreement ends a long-running battle over rules that were first proposed by Brussels in 2013 but held back by resistance from EU governments. The rules for large multinationals will reflect the European Union’s disclosure requirements for banks that were agreed upon in the wake of the financial crisis.
But the details of Tuesday’s deal were criticized by tax justice activists and left-wing MEPs for restricting the scope of the EU disclosure rather than outside it.
“This agreement leaves more than 80 percent of the states in the world, including notorious tax havens such as the Bahamas, Switzerland or the Cayman Islands, about which companies will not have to publish any information,” said Manon Aubry, member of the board of directors at MEP & Company. . – Leader of the European Left Group in the European Parliament.
Tove Riding of the European Network on Debt and Development said the deal was a “missed opportunity” to force large companies to disclose all countries they have taxable activities.
“We need detailed data for each country in which a multinational is located, otherwise companies can hide their profits in jurisdictions where there are no transparency rules,” Riding said.
Sven Giegold, the German green MEP, said that while he would have preferred to have global disclosure rules, Tuesday’s agreement is still “a big step today towards full transparency”. He said that more and more countries could adopt similar laws, which would eventually provide a complete picture.
Under the final agreement, companies can avoid disclosing information deemed “sensitive” for up to five years. The negotiators also decided to review the rules every four years, following demands from member states.
The deal “was a major step towards greater transparency in the EU and the world,” said Gabriel Zucman, economist and head of the new EU-backed European Tax Monitor, which will monitor corporate tax evasion.
“Public information for each country about profits held by multinationals and taxes paid by multinationals is essential to monitoring tax evasion and thinking about better tax policies,” Zucman said.
The agreement is still subject to a final vote by a majority of MEPs and EU governments expected after the summer.
Additional reporting by Sam Fleming in Brussels