28th Sep 2023

Commission and MEPs clash over corporate tax-reporting rules

  • Only 10 of the 27 member states have transposed the public country-by-country reporting directive (Photo: EC - Audiovisual Service)
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A clash between the EU Commission and some MEPs over limiting corporate tax transparency took place on Thursday (13 July) during the plenary session in Strasbourg.

At the centre of the debate was a bill, agreed two years ago as a response to scandals such as the Panama Papers, that will allow citizens to see what companies pay in tax in the EU, and where.

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The so-called public country-by-country reporting (CbCR) directive will require multinationals to publish information on their websites about the taxes they pay in the EU from 2026.

The law should have been transposed into national law by 22 June, but in practice only 10 of the 27 member states have done so.

In addition to this delay, MEPs are concerned about an information letter on so-called 'gold-plating' sent by the commission to member states in recent weeks — behind MEPs' backs.

"This information letter by the commission conveys the impression of a potential constraint to curb the possible willingness of member states to expand the scope of the directive," reads a letter sent yesterday (12 July) by the rapporteurs of the file to the EU commissioner Mairead McGuinness.

A directive is a legally-binding instrument for all member states, but it allows them to go beyond that scope when transposing it to the national level. This is what is meant by gold-plating (adding additional layers to the baseline legislation), and this is where the problem lies.

In the letter, the commission cites some "examples of areas where gold plating might arise". An issue that MEPs say has the potential to limit the information that EU capitals are willing to provide.

"We need more transparency, not less," said Green MEP Rasmus Andresen during the debate in Strasbourg.

"It is a bit of scandal that you as commissioner want to put the brakes on member states," he said, addressing McGuinness.

This approach to EU capitals has also provoked scathing reactions from NGOs such as the European Network on Debt And Development (Eurodad).

"It is urgently needed and fully justified for EU member states to go beyond what is specified in the directive," said its tax coordinator, Tove Maria Ryding.

According to the NGO, the directive does not ensure the provision of all the necessary data per country to detect large-scale corporate tax evasion.

"It's deeply ironic that the commission is now trying to use the directive to stop member states from fixing this fundamental problem and delivering real corporate transparency to their citizens," Ryding said.

During the debate, McGuinness stressed that the letter contains a number of technical issues and is therefore only guidance on how to implement the directive effectively.

"Those who want member states to have more ambition remain free to go beyond this directive," she said.

However, McGuinness underlined the consequences of divergent implementation by capitals. "Patchy implementation on the country-by-country reporting due to gold plating could lead to an unlevelled playing field," the EU commissioner said.

For MEP Evelyn Regner of the Socialists and Democrats (S&D) group, the commissioner's response to the technical nature of her letter was not enough, as these guidelines have a "political influence".

"The guidelines are clearly overshooting the mandate of the European Commission," Regner told EUobserver.

The directive sets some minimum standards for member states, but they can do better, she thinks. Especially as the regulation contains a clause encouraging member states to go beyond the scope of the directive.

The commission's current position would therefore be in contradiction with what was agreed with the co-legislators in 2021.

The S&D MEP maintained her demand for clear answers on the commission's mandate, believing that the institution is not giving a correct interpretation of the reality.

"Only with transparency you can do checks and balances, otherwise, taxes are hidden," Regner stressed.

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