European Commission has taken a major step forward on tax avoidance

Under the new proposal, companies will be forced them to reveal where they make profits and where they pay tax

 

Yesterday the European Commission announced a new proposal to tackle tax avoidance and evasion from multinational corporations by forcing them to publish exactly where they make their profits and where they pay their tax.  

This ‘Public Country-by-Country Reporting’, which I called for in a report last year, would go a long way to making sure these companies play by the rules throughout Europe.

European banks already have to publish Country-by-Country Reports— something which an independent report concluded had not in any way harmed their competitiveness.  In my report, I called for that obligation to be extended to all multinational corporations.  

The release of the Panama Papers last week only added to the urgency for introducing these new rules as soon as possible.

The announcement by the European Commission that it will indeed introduce public country-by-country reporting is a good thing.  It’s a major step forward, and one that quite simply would not have happened without huge amounts of public pressure from right across Europe.

The original design of these new proposals were only going to require companies to break down their figures for the 28 countries within the EU.  Outside of the EU, they could just lump everything together into a single ‘rest of world’ category.  

This would have allowed major multinationals to bundle together the profits they have shifted to somewhere like Panama with the money they make in countries like China or Brazil.  We would have no way of knowing what was legitimate business activity and what was artificially being routed through a tax haven.

Quite obviously, those proposals needed to be seriously re-examined. That’s why Labour MEPs and our Socialist colleagues in the European Parliament, as well as some 45 civil society organisations, have been putting pressure on the European Commission to make sure they strengthen their proposals and make them meaningful.

This action has been successful.  The scope of the proposal has been widened so that companies now have to provide country-by-country information for their activities in territories included on a list of tax havens determined by the Commission based on objective criteria.

That’s a good step — and a real victory for Labour and our allies in civil society organisations. It means that the announcement now includes another recommendation from my report, although it may be lacking the additional punch of sanctions. My original proposal was to impose sanctions on those firms using tax havens and on those tax havens recognised by the EU.

It’s still not perfect. One large problem is that the Commission has decided to only apply the new rules to companies whose turnover is above a whopping €750m. That means it will only cover some 10-15 per cent of all multinational firms and ultimately we would still want to see it broken down Country-by-Country for the whole world, not just for Member States and tax havens.

When my report was approved in the parliament, it received overwhelming support from all parties throughout Europe. The notable exceptions came from the Conservatives and UKIP, who voted against any attempt at making tax more transparent.

This announcement is another excellent example of the EU showing its value and an amazing step forward in the fight against tax avoidance and evasion.  

By opening their books up to the public, we can hold large organisations to account— praising those who play by the rules, and demanding that action is taken against those who don’t.

Anneliese Dodds MEP is a member of the European Parliament economic and monetary affairs committee. Follow her on Twitter

One Response to “European Commission has taken a major step forward on tax avoidance”

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