EU members block transparency proposal
European Union plans to require large multinational companies to publicly reveal their profits and tax liabilities in each member state have stalled.
Twelve countries, including Luxembourg, Malta and Ireland, opposed the transparency measure at a meeting of the EU Competitiveness Council, as Germany abstained and the UK did not vote because of its imminent General Election.
Consequently, the proposal failed to garner the necessary 16 votes to move forward to the European Parliament.
Supporters of the measure saw the vote as a setback to efforts to combat tax avoidance.
Sven Giegold, spokesperson for the Alliance 90/Greens party in the European Parliament, said: “This is a bitter day for tax justice. A blocking minority of member states prevented more tax justice in Europe and sided with the tax havens.”
Bermuda is one of the countries to have signed up to the Organisation for Economic Cooperation and Development’s country-by-country tax reporting for large multinational companies, which is aimed at preventing companies from shifting profits to low-tax jurisdictions.
The rules require large multinational companies with an annual turnover of $750 million or more to provide country-by-country tax and profit reports to national tax authorities.
The EU proposal differs in that it would make such information public. It targets multinational enterprises with total revenue of more than €750 million ($830 million) in each of the past two financial years, requiring that they disclose the income tax they paid in each member state along with other relevant tax-related information.
Some countries, including Germany, worry that revealing companies’ tax and profit information publicly will give a competitive advantage to companies outside the EU that don’t have to report the information.
One head of tax at a multinational manufacturing company told International Tax Review: “It’s not just reputational risk, but wider business competitiveness. Public CbCR offers tax information on EU-based companies, including insights into [tax] structures, but US companies don’t share this information under any such standard.”
The legal basis of the EU proposal as EU single-market law was a major source of disagreement in the European Competitiveness Council meeting.
Ten countries put forward a statement saying it should instead be considered tax law, which would require unanimous approval by member states, rather than the majority vote needed for single-market law.
However, member states led by France, Italy, Spain, Poland, the Netherlands, Denmark, Belgium and Finland argued during the debate that the core of the legislation dealt with transparency and not taxation.
“This legislation does not impose a tax nor does it affect the tax base of corporations,’’ Timmo Harakka, Finland’s labour minister, said. “Therefore it does not impact national tax sovereignty of member states.”
Ireland and Luxembourg are among the lower-tax EU countries who have most to lose from measures to reduce tax avoidance. Each are also home to the European operations of some of Bermuda’s international re/insurers.
Luxembourg, in particular, is coming under increasing scrutiny. International Monetary Fund data showed that the country of 600,000 people hosts as much foreign direct investment as the United States. The IMF argues that much of this flow goes to “empty corporate shells” designed to reduce tax liabilities in other countries.
Tech firm sold on pandemic visa
Price comparison website launched
Storm could alleviate dry spell
No charges for second curfew violator
Simmons named BEDC chairman
New Chief Medical Officer arrives
Senior given ‘time served’ for standoff
Take Our Poll
- "Who will the Progressive Labour Party run in the Smith's West by-election against Vic Ball after the retirement of Trevor Moniz?"
- Vance Campbell
- Ernest Peets
- Anthony Richardson
- Curtis Richardson
- Roseanne Tucker
- Total Votes: 1132
- Poll Archive