MCD McDonalds Corp

BRUSSELS—Large multinational companies such as Google Inc., IKEA and Amazon Inc. will be forced to publish profits and tax bills from European Union countries in which they operate, under plans the bloc's executive will bring forward next week.

The proposal to open up so-called country-by-country reporting will be presented Tuesday and forms part of a broader effort by the European Commission to ensure companies don't skimp on their taxes. Similar rules already apply to EU banks.

Under the plan, EU companies with annual revenue of more than €750 million ($856 million) will have to publish a report on income and tax information that will be made accessible to the public. The rules will also apply to medium and large subsidiaries of non-EU companies operating within the 28-country bloc.

In January, the commission proposed a series of rules aimed at stopping large-scale corporate tax avoidance in Europe, where governments are struggling to close budget gaps in the wake of the financial crisis. Those proposals included country-by-country reporting for large companies but limited the information to tax authorities.

The push to make the detailed reports public came after newspapers around the world uncovered thousands of offshore accounts allegedly held by officials, executives and celebrities. The trove of emails and data on the accounts were allegedly leaked from the Panamanian law firm Mossack Fonseca.

"After the Panama papers, there must not be a single hesitation from anybody that we need a public country-by-country reporting," said Pierre Moscovici, the EU's taxation commissioner.

Around 6,500 companies world-wide could be covered by the proposed rules, 2,000 of which are based in Europe, according to EU officials.

The proposed disclosures, however, don't cover multinationals' operations in countries outside the EU. That has drawn fire from tax transparency campaigners, who argue that tax havens, where many companies shift their profits, should fall under the new rules. Instead, companies would publish data on their activities outside the EU as an aggregate and not broken down by country.

"It would be very embarrassing for the commission if its new flagship tax-transparency rules will still allow companies to get away with the kind of dodgy practices exposed by the Panama Papers," said Elena Gaita, a policy officer for corporate transparency at Transparency International, the global anticorruption group.

Mr. Moscovici signaled that there could be some last-minute tweaks to the plan to account for operations in tax havens. "After the Panama papers we will have the political capacity to go further," he said.

EU authorities are still reeling from revelations in 2014 that many multinational companies struck sweetheart deals in countries such as Luxembourg that allowed them to pay little tax in the bloc. The commission has launched a series of investigations into special tax deals for multinationals, which it said could amount to illegal state subsidies.

The European Parliamentary Research Service estimated corporate tax-avoidance costs EU countries between €50 billion and €70 billion in revenue each year.

Still, tax-transparency campaigners said next week's proposal should be more ambitious, because the €750 million revenue threshold lets too many multinationals off the hook. EU officials argue the threshold covers all the companies that can afford "aggressive tax planning," which takes advantage of loopholes and mismatches in different tax systems to reduce bills.

Transparency campaigners also said the proposal doesn't ask companies to publish enough information. But EU officials and companies said asking companies to divulge potentially commercially sensitive information could put them in a weaker position compared with competitors operating elsewhere.

Irene Yates, McDonald's Corp.'s vice president for corporate tax, told European lawmakers last month that it would be better to keep country-by-country tax and profit reports out of the public eye. It is important "to keep information confidential when sharing between tax authorities," she said.

The proposal will still have to be agreed by EU governments and the European Parliament before becoming law, a process which could take months.

Natalia Drozdiak contributed to this article.

Write to Viktoria Dendrinou at viktoria.dendrinou@wsj.com

(END) Dow Jones Newswires

April 08, 2016 14:35 ET (18:35 GMT)

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