European Parliament votes in favour of tax transparency rules

6 Jul 17

The European Parliament has voted in favour of a measure requiring large multinational companies to report their tax affairs on a country-by-country basis.

It is hoped the change will increase tax transparency by providing more clarity on how much tax large companies pay and where they pay it.

In total, 534 MEPs voted in favour of the measure and 98 against, with 62 abstaining.

Austrian MEP Evelyn Regner is one of the proposals rapporteurs.

She said: “If we don't make country-by-country reporting, we will never bring to light the system of letterbox-companies that is abused to shift profits and avoid taxes worldwide. 

“We are ready now for negotiations with the [European] Council to find a common reporting regime; the EU must lead the fight against tax avoidance.”

Her fellow co-rapporteur Belgian MEP Hugues Bayet said: “Each euro of tax which is not paid by the multinationals is a euro too much paid by the individual.”

The proposal applies to companies with turnover of $750m or more. Their tax bill would be published in a common template in each tax jurisdiction in which the firm or its subsidiary was operating.

This data would be publicly accessible on the company website and a report would also have to be filed in a public registry managed by the European Commission.

Information would include:

·      the firm’s name and a list of its subsidiaries

·      number of fulltime equivalent employees

·      net turnover

·      stated capital

·      profit or loss before income tax

·      income tax paid during the relevant financial year

·      amount of accumulated earnings

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

EU member states would be permitted to grant exemption from these requirements in cases of commercial sensitivity, although such exemptions would be reviewed every year.

The vote was welcomed by ActionAid, who campaign for improved tax transparency.

Head of advocacy Charlie Matthews said: “This vote could prove to be an historic moment in the fight against tax avoidance.

“Public country-by-country tax reporting would shine a light on the tax affairs of multinational companies, allowing the public to see how much tax they are really paying.”

But she dubbed the commercial sensitivity exemptions a “loophole” and said it was disappointing they had been included.

“It is vital that these exemptions are not allowed to be exploited by companies looking to keep profits hidden in tax havens,” Matthews said.

According to European Commission estimates, €50-70bn tax revenue a year is lost through corporate tax avoidance.

The proposed rules will now be subject to negotiation between the Parliament, the Commission and the Council [representatives of EU governments] and all parties must agree before they can be adopted into law.

Talks are not expected to begin until after the summer and are likely to take months.

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