Large multinationals will have to reveal how much taxes they pay in each country of the European Union. A transparency measure that pursues the objective of tackling tax evasion and that has been ratified this Tuesday by the Council of the EU (the 27 governments). The directive on the disclosure of income tax information by certain companies and subsidiaries, commonly known as the directive on country-by-country public reporting (CBCR), has been adopted following the interim agreement reached with the European Parliament. last June.
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Thus, the CBCR directive “aims to improve the corporate transparency of large multinational companies”, states the Council: “It will require certain multinational companies with revenues of more than 750 million euros to publicly disclose the tax they pay on their profits. For the first time, non-European multinationals operating in the EU through subsidiaries and branches will also have to comply with the same reporting obligations as EU multinational companies. ”
The information must be provided within 12 months of the balance sheet date for the year in question. The directive establishes the conditions under which a company can defer the disclosure of certain information for up to five years, and also stipulates who has the responsibility to ensure compliance with the reporting obligation.
Under the new directive, which was presented for the first time by the Community Executive in 2016, multinationals that invoice more than 750 million euros per year for two consecutive years will be obliged to declare how much they earn in profits, how much they pay in taxes and how many male and female employees have in the EU countries, as well as the jurisdictions on the black list and the gray list of non-cooperative jurisdictions in the EU.
According to sources in the European Parliament, it has been the Council that has rejected the global breakdown to introduce a safeguard clause that could allow certain companies to evade their reporting obligations. Thus, the final text introduces another review clause for these elements.
Ibán García del Blanco, Socialist MEP and Parliament negotiator, stated when the agreement with the European Parliament was closed: “Although we deeply regret that the Council has rejected our persistent demands for a global report, country by country, broken down, the agreement is a important step towards greater corporate transparency and contains a number of improvements. During the negotiations we managed to include a requirement that companies must inform all their full-time employees and list all subsidiaries. This will make it much more difficult for companies blow smoke and hide their real economic activities in each country. ”
En Comú Podem MEP Ernest Urtasun, Greens / ALE rapporteur for the report in the Committee on Economic and Monetary Affairs, said: “The public CbCR means that people will be able to know how much taxes big companies pay and where. This is a victory for citizens and shows that the EU can act on issues that concern people. In the long term, tax justice will be essential for citizens to trust the capacity of the European project. Public information will help for multinationals to end aggressive tax planning practices, tax dumping and profit shifting. It will help end unfair deals that put member states in a race to the bottom at the expense of citizens. This it is vital in times when our economies are suffering from the COVID-19 pandemic. ”
Chiara Putaturo, a tax expert at Oxfam EU, reacted critically: “This agreement does not live up to expectations. The agreement does not oblige companies to provide real country-by-country reporting as it leaves more than of three-quarters of the world’s countries. Instead, EU lawmakers have provided multinational corporations with many opportunities to continue to secretly evade taxes by shifting their profits to tax havens outside the EU, such as Bermuda, the Cayman and Switzerland. The agreement also leaves the poorest countries in the dark by not shedding light on the activities of multinationals in their countries. ”
Rosa Pavanelli, Secretary General of Public Services International, lamented: “It is more than a missed opportunity for the EU, it is the EU defending the interests of large corporations over its citizens.”
The European Parliament adopted its position at first reading on March 27, 2019. Negotiations between the co-legislators began in March 2021 and resulted in an interim agreement on June 1, 2021, closing points such as the transition period and the clause safeguard.
The next step before the directive can enter into force is the formal approval of the interim agreement by the European Parliament. The directive will enter into force on the 20th day following its publication in the Official Journal of the European Union. Member States will have 18 months from the entry into force of the directive to transpose it into national law.