MEPs Call For Greater Tax Transparency
July 7th, 2017. \\ Business and Economy.

Large firms must make information about the tax they pay in each country in the world publicly available, say MEPs.

They backed a proposal requiring multinationals to report their tax bills on a country-by-country basis – with possible exemptions in the case of commercially-sensitive information.

The aim of the measure is to increase tax transparency by providing the public with a picture of the taxes paid by multinationals, and where those taxes are paid.

Under the proposed measures, the income tax information of multinational firms with worldwide turnover of €750 million or more would be published in a common template in each tax jurisdiction in which the firm or its subsidiary was operating. This data would be available for free and made publicly accessible on the website of the firm.

The company would also be responsible for filing a report in a public registry managed by the European Commission.

The information would include:

· the name of the firm and, where applicable, the list of all its subsidiaries, a brief description of the nature of their activities and their respective geographical location;

· the number of employees on a full-time equivalent basis;

· the amount of the net turnover;

· stated capital;

· the amount of profit or loss before income tax

· the amount of income tax paid during the relevant financial year by the firm and its branches resident for tax purposes in the relevant tax jurisdiction

· the amount of accumulated earnings

· whether undertakings, subsidiaries or branches benefit from a preferential tax treatment

MEPs also supported measures to protect commercially-sensitive information by allowing Member States to grant exemptions from the requirement to provide one or more pieces of information. These exemptions would be renewed annually and would only be applicable in the jurisdiction of the Member State granting the exemption.

Once a Member State grants an exemption, it must inform the EU Commission confidentially about the omitted information, together with a detailed explanation for the exemption.

Every year, the Commission will publish on its website a list of firms which were granted exemptions and a succinct explanation why.

Parliament also supported amendments which would set limits on exemptions won by firms on providing their tax information. One obliges companies who lose their eligibility for an exemption to immediately make the omitted data publicly available. Firms will also have to apply for a renewal of their exemption, annually.

In addition, at the end of the non-disclosure period, the firm must publish its tax details retroactively “in the form of an arithmetic average” to cover that period when they did enjoy immunity from providing details.

After approving the draft report by 534 votes to 98 votes, with 62 abstentions, MEPs voted to send the report back to the Committees to start negotiations in 1st reading on the basis of a plenary mandate.

The proposals are a bid to crack down on corporate tax avoidance, which is estimated to cost EU countries EUR 50-70 billion a year in lost tax revenues, according to the European Commission.

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Image credit: European Parliament

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Martin Banks is a highly experienced accredited journalist with many years experience of working with the EU institutions. He is an occasional contributor to EU today, writing on a wide variety of issues.

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