Friday

23rd Jun 2017

MEPs dispute details of corporate transparency bill

  • Paris's La Defense business district. Companies operating in the EU will be required to report about their activities all over the world, country by country. (Photo: Florent Le Gall)

MEPs from the economic affairs and legal affairs committees adopted a draft directive on Monday (12 June). It will force all multinational companies in the EU to disclose information related to their activities in each country where they operate.

The so-called country-by-country reporting will require companies operating in the EU, with a turnover above €750 million, to publish a number of details regarding their activities – such as profits before tax, turnover and the amount of paid taxes.

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

The goal is to shed some light on every company's internal arrangements, showing whether they use tax optimisation schemes.

The reporting will also require all companies operating in the EU to disclose information on their activities in non-EU countries – also on a country-by-country basis.

In the original proposal presented by the European Commission in 2016, companies were required to report country by country on their activities in the EU, but were only obliged to publish "aggregated" data on their activities outside the EU.

The extension of country-by-country reporting to non-EU countries was pushed forward by left-wing, green and liberal MEPs.

They argued that "aggregate" reporting would seriously undermine the rules regarding country-by-country reporting, and prevent citizens from knowing whether companies are shifting money out of the EU.

Liberal U-turn

The text adopted by MEPs on Monday, which will have to be adopted by the plenary and then negotiated with member states, also introduces a "safeguard clause" within the scheme.

The clause will allow companies to "temporarily omit" some information when disclosure could be "seriously prejudicial".

Companies will be able to ask national authorities to exclude activities in some countries or some information from the reporting, on the grounds that it is "commercially sensitive". If approved, the exemption lasts for one year, and can be renewed an unlimited number of times.

"This is disappointing, we need full transparency", Elena Gaita, a policy officer at Transparency International, told EUobserver.

"The clause is too broad, and it will lead to jurisdiction shopping".

The "safeguard clause" was proposed last week by liberal MEPs as a compromise, so that conservative MEPs would agree to the provision on non-EU country-by-country reporting.

However, the safeguard clause has proved controversial in talks ahead of Monday's vote, with left-wing and green groups opposing it.

"The EU parliament is always claiming that it will fight for tax transparency, but when it can actually do something, it proves even less ambitious than member states", a source from a left-wing group told EUobserver, referring to previous parliament reports that asked for full tax transparency.

But Spanish MEP Enrique Calvet Chambon, who is following the file for the Liberal group, described the provision as a good bargain – somewhere between the right-wing MEPs, who wanted an "unlimited" safeguard clause, and the left-wing ones, who were initially in opposition to any at all.

"We maintain the obligation to disclose information for every country, in and out the EU – this is paramount," Chambon told EUobserver before the vote.

He stressed that the exemption will be reviewed four years after entering into force, in order to check whether there has been any "abuse".

"We will know which companies applied, and whether the exemption has been granted or not. We will also know how many exemptions have been granted by each member state", he added.

But left-wing and green MEPs regret that the Liberal group did not support a previously proposed compromise, which was negotiated at the end of May.

The previous proposal incorporated a different safeguard, allowing multinational national companies to omit the publication of information for 2 years, and only for countries in which it was starting new activities. But the omission was only valid for two years, and the omitted data had to be retroactively published after this period.

"This was better, because the non-publication was more carefully framed, was limited in time, and because the information had to be published at one point", said Elena Gaita, from Transparency International.

Council's disarray

After Monday's vote is confirmed by a plenary vote in the parliament, MEPs will start negotiations with member states to reach an agreement on a final text.

But discussions have been stuck at the Council of the EU, where the representatives of member states sit, with several countries, such as Germany and Malta, trying to block the proposal.

The council's legal service also criticised the legal basis of the proposal. It said that it is a tax-related issue, rather than an internal market issue, and that it should be dealt with only by member states on the basis of unanimity – requiring all EU countries to agree in the council.

Happy banks

Public country-by-country reporting is also opposed by companies, which are reluctant to disclose information that could be commercially sensitive.

"Implementation of this proposal would damage the attractiveness of the EU as an investment destination for foreign direct investment, ultimately reducing overall levels of corporate tax receipts and growth in the EU", BusinessEurope, a corporate lobby, said in a letter to the chair of the parliament's economic affairs committee.

However, Gaita from Transparency International pointed out that full transparency per country, without any "safeguard clause", already exists for EU companies in the extractive and logging industries, as well as for banks.

"A few years ago, banks were saying that full transparency will undermine their competitiveness. But now that it is in place, they don't complain anymore", she stressed.

In a 2014 report on bank reporting, private consultants PricewaterhouseCoopers (PwC) said that such measures were likely to "have some positive impact on the transparency and accountability of, and on the public confidence in, the financial services sector."

The company also said that "public disclosure of such information" would not have "noticeable negative economic consequences".

EU to toughen corporate tax disclosures

EU financial services Commissioner Jonathan Hill is set to present a bill to make it more difficult for big firms to hide their assets from tax authorities.

EU may impose full tax transparency on US firms

Big US firms like Google and Amazon could be forced to reveal their earnings and tax rates to the wider public as the European Commission mulls a new proposal set for April.

Row between EU ministers halts e-book tax rate

A bill to reduce VAT rates on e-books and e-publications has become the latest victim of a row between the Czech Republic and its partners over its own plan to collect VAT.

Focus

EU and China move to fill US void

At a summit in Brussels, EU and Chinese leaders will attempt to deepen ties on trade and climate as US president Trump plans to pull out of the Paris climate deal.

Italy reaches EU deal on failing bank

After months of negotiations, the European Commission and Italy agreed on the terms of rescue for Monte dei Paschi di Siena bank, including job cuts, salary caps and private sector involvement in the bailout.

News in Brief

  1. Juncker has 'no' clear idea of kind of Brexit UK wants
  2. Belgian PM calls May's proposal on EU citizens 'vague'
  3. UK lacks support of EU countries in UN vote
  4. Spain to command anti-smuggler Mediterranean force
  5. Estonia confirms opposition to Nord Stream 2 pipeline
  6. Ireland and Denmark outside EU military plan
  7. EU leaders renew vows to uphold Paris climate deal
  8. US issues warrant for VW managers, German media say

Stakeholders' Highlights

  1. EGBAOnline Gambling: The EU Court Rejects Closed Licensing Regimes In Member States
  2. World VisionFaces of Today, Leaders of Tomorrow: Join the Debate on Violence Against Girls - 29 June
  3. ECR GroupThe EU Must Better Protect Industry from Unfair Competition
  4. Malta EU 2017Better Protection for Workers From Cancer-Causing Substances
  5. EPSUAfter 9 Years of Austerity Europe's Public Sector Workers Deserve a Pay Rise!
  6. Dialogue PlatformGlobalised Religions and the Dialogue Imperative. Join the Debate!
  7. UNICEFEU Trust Fund Contribution to UNICEF's Syria Crisis Response Reaches Nearly €200 Million
  8. EUSEW17Bringing Buildings Into the Circular Economy. Discuss at EU Sustainable Energy Week
  9. European Healthy Lifestyle AllianceCan an Ideal Body Weight Lead to Premature Death?
  10. Malta EU 2017End of Roaming Charges: What Does It Entail?
  11. World VisionWorld Refugee Day, a Dark Reminder of the Reality of Children on the Move
  12. European Social Services ConferenceDriving innovation in the social sector – 26-28 June

Stakeholders' Highlights

  1. Dialogue PlatformMuslims Have Unique Responsibility to Fight Terror: Opinon From Fethullah Gülen
  2. EUSEW17Check out This Useful Infographic on How to Stay Sustainable and Energy Efficient.
  3. Counter BalanceEuropean Parliament Criticises the Juncker Plan's Implementation
  4. The Idealist QuarterlyDoes Europe Really Still Need Feminism? After-Work Chat on 22 June
  5. EUSEW17Create an Energy Day Event Before the End of June. Join the Call for Clean Energy
  6. UNICEF1 in 5 Children in Rich Countries Lives in Relative Income Poverty, 1 in 8 Faces Food Insecurity
  7. International Partnership for Human Rights26 NGOs Call on Interpol Not to Intervene Versus Azerbaijani Human Rights Defenders
  8. Malta EU 2017Significant Boost in Financing for SMEs and Entrepreneurs Under New Agreement
  9. World VisionYoung People Rise up as EU Signs Consensus for Development at EU Development Days
  10. ILGA-EuropeLGBTI Activists and Businesses Fighting Inequality Together
  11. Nordic Council of MinistersNordic Prime Ministers Respond to Trump on Paris Agreement
  12. European Healthy Lifestyle AllianceNutrition and Heart Disease: Time to Raise Our Standards