Thursday

2nd Jul 2020

EU to toughen corporate tax disclosures

  • The EU commission wants big firms to come clean on taxes (Photo: Adolfo PM)

The European Commission is set to unveil a proposal to help stop corporate tax avoidance, as pressure mounts to crack down on tax havens in the wake of the Panama Papers.

The proposal seeks to force big firms to disclose how much tax they pay in each of the 28 EU member states, but it may go further given last week's media revelations on how the global elite eschews paying into public coffers on a massive scale.

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The country-by-country reporting in the draft directive would apply to firms with more than €750 million in annual global sales, which would cover about 6,500 firms.

Critics say the threshold needs to be lowered to cover many more companies.

Between €50 and €70 billion is lost each year in the EU by firms that avoid paying taxes, notes the draft proposal.

The initial draft limited the disclosures to operations in EU states but may now include tax havens located outside the EU, following the leak of some 11 million documents from Panamanian law firm Mossack Fonseca.

"Companies would also be required to report on the total tax they pay outside the EU, with country specific information required for tax paid in problematic tax jurisdictions," said financial services commissioner Jonathan Hill and euro commissioner Valdis Dombrovskis in an op-ed in the Irish Times.

Firms would be required to publish information on revenue and pre-tax profits or losses, among other financial details. The information would be available on the company's website.

But tax transparency campaigners warn the proposal may contain a big loophole, given that EU states have no common definition of what constitutes a tax haven. Developing countries, they note, also need to be included in the scope of the proposal.

Germany's finance minister Wolfgang Schauble and French counterpart Michel Sapin launched separate plans on Monday to include offshore jurisdictions in their efforts to crack down on corporate tax avoidance, reported the Financial Times.

“We need full transparency worldwide,” the newspaper quoted Schauble as saying.

They want to create a common tax-haven blacklist for jurisdictions where money is hidden away from public scrutiny. They also want to lift the anonymity of owners behind corporate structures like shell companies, trusts, and foundations.

Last week, EU tax commissioner Pierre Moscovici also urged member states to agree to common blacklist within six months.

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