EU negotiators have agreed on rules that require large multinational companies to make public where they record their profits և pay taxes to the bloc as part of their drive to avoid corporate taxes in Europe.
After years of stalled negotiations, EU governments անդամ MEPs have entered into a so-called ‘country-by-country’ tax reporting deal for large non-EU companies operating in the single market, which are on the Brussels tax haven list.
The move has been hailed as a breakthrough for tax transparency as international policymakers step up demands to revise corporate tax rules. G7 countries expected to sign effective political agreement on raising minimum corporate tax by the end of this week interest rate of 15%,
“I am convinced that this bargaining chip by the public is just the beginning of tax justice and financial transparency in Europe,” said left-wing MEP Evelyn Regner, who led the negotiations for the European Parliament.
According to EU country-by-country rules, two companies in a row with a global income of at least € 750 million must publicly disclose how much tax they pay in each of the bloc’s 27 member states, as well as the additional 19 entitlements considered by the Federation. The EU will be a “non-cooperative” tax authorities. These include “blacklisted” powers such as Guam and the US Virgin Islands, as well as “blacklisted” tax havens, including Panama, Fiji and Samoa.
Large companies are already required to report their profits to national tax authorities under EU tax, but the information has not been released.
50 billion euros – 70 billion euros
Estimated annual losses of EU governments in avoiding corporate taxes
Politicians and tax activists cited the agreement as a first step in measuring the scale of corporate tax evasion in the EU. According to Brussels, EU governments lose about 50-70 billion euros a year from corporate tax evasion.
The agreement concludes a long-term struggle over the rules first proposed in Brussels in 2013. The rules for large multinational corporations will reflect EU disclosure requirements for banks agreed upon after the financial crisis.
But details of Tuesday’s deal have been criticized for limiting the scope for tax justice activists – left-wing MEPs – to limit the EU’s revelations.
“This agreement leaves more than 80 percent of the world’s countries, including notorious tax havens such as the Bahamas, Switzerland or the Cayman Islands, for which companies will not have to disclose any information,” said Manon Aubrey, Member of the European Parliament – European Left Group Leader:
Tove Ryding of the European Debt Development Network says the deal is a “missed opportunity” to force large companies to identify all the countries in which they are taxed.
“We need separate data for each country where a multinational company is present, otherwise companies can hide their profits in areas where there are no transparency rules,” Riding said.
Sven Gigold, Germany’s green MEP, said that although he preferred global rules of disclosure, the agreement on Tuesday was still “a big step towards full transparency”. He argued that more and more countries could adopt such laws, eventually providing a complete picture.
Under the final agreement, companies can avoid disclosing information that is considered “sensitive” for up to five years. The negotiators also decided to revise the rules every four years at the request of the member states.
Gabriel Uc Ukman, an economist and head of the European Union-backed European Tax Observatory, which oversees corporate tax evasion, said the deal was “a big step towards greater transparency in the EU and around the world”.
“In order to control tax evasion, to think about better tax policies, public information on the profits fixed by multinational corporations and the taxes paid by multinational corporations is needed,” he said.
The agreement is still subject to a final vote by a majority of MEPs and EU governments, which is expected after the summer.
Additional report from Sam Fleming of Brussels