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EU Endorses New Tax Transparency Rules For Multinationals

European Union member states and lawmakers on Tuesday reached a deal on tougher tax transparency measures for multinationals.

The new rules which require multinational companies to list their profits made, taxes paid and the number of people they employed in individual EU countries, are coming following increased international pressure on the issue of multinationals and tax avoidance.

Although the measures approved in theory would do nothing to bring in more tax revenues, but would compel multinationals to show where they are making major profits within the EU, and perhaps paying far more modest taxes.

A news report sourced from Reuters by our correspondent indicated that the new law would apply to multinational corporations with a turnover of more than €750 million ($916 million) annually in two consecutive years.

The affected big entities would also be obliged to declare profits made, taxes paid, and their number of employees in each EU country where they operate, as well as in countries on the EU’s tax haven blacklist.

In addition, they are also required to provide authentic data on tax paid in other countries outside the EU and not on the tax havens and blacklist must be provided but not broken down in view of the fact that not all EU governments agreed to a more detailed country-by-country breakdown.

The news report quoted some countries and members of the European Parliament who negotiated the deal as saying that it will help make the tax system fairer.

For instance, Portugal, which currently holds the six-monthly rotating chair of the European Council, hailed the obligation for public country-by-country reporting as a major step towards ensuring tax justice.

Commenting, Ernest Urtasun of the parliament’s economic and monetary affairs committee said: “These tax transparency measures will help to ensure that multinational companies pay their fair share and can bring some fairness to how they operate.”

According to the Tax Justice Network think-tank, it is estimated that currently, about 36% of tax lost globally to corporate tax abuse was owed to EU countries, costing countries globally over $154 billion yearly as most multinationals shift their profits to low tax jurisdictions like Ireland, Luxembourg and the Netherlands.

Despite enjoying the commendation of many EU top government representatives, some campaigners for tax justice criticized the measures for not going far enough.

Oxfam, anti-poverty NGO, said many of the world’s tax havens were not on the EU list of non-cooperative jurisdictions – the EU’s tax blacklist – and, therefore, would avoid scrutiny.

Some other NGOs, including Transparency International, the European Network on Debt and Development (Eurodad), a civil society group that campaigns for a more equitable global financial system; and Public Services International (PSI), a global federation of more than 700 trade unions representing 30 million workers in 154 countries, have rated the deal low in terms of its potential benefits.

For instance, the NGOs lamented that the disclosure rules were limited to multinationals’ EU operations despite efforts by the Parliament to include global activity, which EU governments in the Council refused to accept.

Before it will be enforced, the rules still have to be formally approved by members of the European Parliament as well as be signed by the European Council. The Council is made up of the heads of state and government of EU members.

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