Figures showing the tax payments and business activities of corporations in each country are normally secret to the public. Introducing public country by country reporting rules would change that, and allow citizens to know where multinational corporations do business and how much tax they pay in each country where they are operating, and thereby acting as a disincentive for large-scale tax avoidance.
Unfortunately, the EU has not yet reached political agreement on introducing real public country by country reporting. In April 2016, the European Commission put forward a long-awaited proposal on the issue. However, the proposal would unfortunately only require corporations to publish information on their operations in EU member states and in countries that are included on an EU ‘blacklist of tax havens’.
Limiting information to EU countries and a subset of blacklisted countries is highly problematic for several reasons. Firstly, it would only give the public an incomplete picture of a large multinationals’ activities worldwide. Secondly, it would mean that multinationals would continue to be able to engage in profit shifting to low-tax jurisdictions that do not make it onto the EU blacklist. Lastly, developing countries would be especially disadvantaged by this proposal, as it would leave them in the dark about the activities of large multinationals operating in their jurisdictions. Furthermore, the Commission’s proposal would only apply to corporations with a turnover of at least €750 million per year. According to the OECD, only 10-15 per cent of the world’s multinational corporations meet this threshold.
In response to the Commission’s proposal, EU member states issued an initial informal position that suggested limiting transparency even further. Furthermore, some EU member states have proposed a change to the legal basis for the proposal, which would in effect exclude the European Parliament from the decision making, and mean that the proposal would require unanimous consent from EU member states. A change in the legal basis would give a single member state the opportunity to veto the legislation, which would in all likelihood lead to a less ambitious outcome, or even no outcome at all.
However, the negotiations are continuing, and no final EU decision has yet been made.
The report Tax Games – the Race to the Bottom maps and rates the positions of 18 European countries, as well as the European Commission and Parliament, on the issue of public country by country reporting.
Click here to see a summary of the ratings.
The criteria for the rating can be found here.
To read the full report (including sources and references) click here.