Members of the European Parliament sealed a deal obliging multinationals to publicly declare what taxes they pay in each European Union country, overcoming five years of foot-dragging by some governments, the European Parliament said on June 2.
The deal struck on Tuesday night between European Parliament and Council negotiators sets in place rules that require multinationals and their subsidiaries with annual revenues of more than 750 million euro, and which are active in more than one country, to publish and make accessible the amount of taxes they pay in each member state, the statement said.
The information will also need to be made available on the internet, using a common template, and in a machine-readable format.
To facilitate the use of the information provided and increase transparency, the data provided will need to be broken down into specific items, including the nature of the company’s activities, the number of full-time employees, the amount of profit or loss before income tax, the amount of accumulated and paid income tax and accumulated earnings.
Subsidiaries or branches falling below the revenue threshold will also be required to report if they are deemed to exist only to help the company avoid the reporting requirements.
Some provisions allow room for manoeuvre for multinationals to be temporarily exempt from some reporting requirements, but these are nonetheless strongly circumscribed.
The tax transparency reports should also extend to the EU list of non-cooperative jurisdictions for tax purposes outside the EU (countries on the so-called EU “black” and “grey” lists), says the agreed text.
Although MEPs wanted stronger provisions to tackle profit shifting to non-EU tax havens, the new rules will still shed some light on taxes being lost to tax havens. In January 2021, Parliament agreed that six of the 20 largest tax havens are EU countries, with two of the top five spots occupied by member states.
Also, a study by the Director of the EU Tax Observatory concludes that about 80 per cent of the profits shifted in the EU are shifted to EU tax havens.
One of the most difficult points for negotiators was on full disaggregation on country-by-country reporting.
European Parliament negotiators underlined that these rules are a first step in achieving tax transparency and secured a strong and robust review clause that allows rules to be revisited in four years and extended after an assessment.
(Photo: Vangelis Thomaidis)
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