Thursday

21st Nov 2019

Multinationals must publish tax payments, MEPs say

  • Multinationals must shine a light on tax payments to governments, under new rules backed by MEPs (Photo: Mags_cat)

MEPs have backed rules that would require multinationals to report their tax payments on a country-by-country basis.

Deputies in Strasbourg voted by a 556 votes to 67 margin on Wednesday (8 July) to approve plans to re-write the EU’s eight-year old Shareholders’ Rights Directive that would require listed companies to publicly report financial information, including profits and losses, tax payments, and public subsidies received on a country-by-county basis.

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The parliament wants shareholders to have the right to vote at least once every three years on a listed company’s remuneration policy for its directors. However, national governments should be allowed to decide whether shareholder votes are binding or advisory.

“It is high time that large companies pay their taxes where profits are generated,” Sergio Cofferati, the Italian centre-left MEP piloting the bill through parliament, said.

"This vote shows widespread support for opening up the black box of multinational corporations' finances," said Carl Dolan, Director of Transparency International EU.

However, Jason Piper, of the Association of Chartered Accountants, struck a note of caution to legislators, warning that “the risk with country-by-country-reporting (CBCR), imposed across every sector in every economy under a one-size-fits-all policy, is that there will be some sectors and business models that it really doesn’t fit all well".

“To be relevant, the new rules need to be better than what we have now, and not just an extra disclosure that is of no added-value to transparency", he added.

Almost three quarters of listed companies currently fail to disclose any information about tax payments in foreign countries, according to research by Transparency International.

Cracking down on corporate tax avoidance has been high on the parliament’s priority list in recent years.

EU lawmakers introduced legislation in 2013 requiring EU-listed firms in the extractive and logging industries to publish all payments made to host governments, while banks also face similar reporting requirements.

The parliament also launched an ongoing inquiry into corporate ‘sweet-heart’ deals between corporations and governments, which have resulted in firms such as Amazon, Starbucks, and Google paying as little as 1 percent tax rates.

For its part, the European Commission outlined its own proposals to improve tax transparency in March, including requirements for national authorities to exchange information on tax rulings every three months.

Deputies will now open trilogue negotiations with government ministers in a bid to seal agreement on the bill.

Negotiations between MEPs and ministers will, ironically, be brokered by Luxembourg, the EU micro-state at the heart of the so-called Luxleaks scandal which broke last autumn.

Details of around 500 government-backed tax rulings were published last November, by a group of journalists from the International Consortium of Investigative Journalists, indicating that over 340 multinational companies had been allowed to avoid paying billions in tax under a series of secret agreements.

European Commission president, Jean-Claude Juncker, is also a former prime minister of the Grand Duchy and was both leader and finance minister when many of the deals are alleged to have been cut.

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