EU Proposes Multinationals Publish Profits Generated in Tax Havens
April 12 2016 - 9:40AM
Dow Jones News
BRUSSELS—Large multinationals operating in the European Union
will have to publish profits and tax bills generated in countries
considered to be "tax havens," the bloc's executive arm said
Tuesday as it toughened up proposals for fighting tax avoidance
following the "Panama Papers" leak.
The European Commission had already been working on plans to
open up to the public reports by thousands of companies on profits
reaped and taxes paid in individual EU countries—an unprecedented
move for a major jurisdiction.
But the EU reworked its proposals in recent days to also require
public and more exhaustive reporting of companies' operations in
tax havens, after newspapers around the world uncovered thousands
of offshore accounts—allegedly held by officials, executives and
celebrities—via documents leaked from Panamanian law firm Mossack
Fonseca & Co.
"By adopting this proposal, Europe is demonstrating its
leadership in the fight against tax avoidance," said Valdis
Dombrovskis, vice president of the European Commission in charge of
euro and social dialogue.
Tuesday's proposals show how the commission is accelerating
efforts to snuff out large-scale corporate tax avoidance amid
pressure from the public. A previous proposal that would require
national tax authorities to share corporate reports on profits and
taxes was only approved by EU finance ministers last month.
Under Tuesday's plans, companies operating in the EU whose
annual revenue exceeds €750 million ($856 million) would have to
publish the reports, which would include details on business
operations, such as the number of employees and nature of
activities in the different tax jurisdictions.
The EU is still drawing up its list of non-EU countries that
don't meet international standards for good governance in taxation.
For all other non-EU countries whose tax rules are deemed in line
with the standards, companies would only have to publish an
aggregate figure of profits in all those countries.
The EU has been cracking down on companies trying to dodge taxes
following 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. Corporate tax avoidance
costs the bloc's member states between €50 billion and €70 billion
a year in lost tax revenues, according to the EU.
"Our proposal to increase transparency will help make companies
more accountable," said Jonathan Hill, the EU's financial
chief.
Several large companies, including McDonald's Corp. and IKEA,
have questioned plans to make the reports public, claiming that
disclosing such commercially sensitive information would place them
at a disadvantage compared with rivals operating elsewhere.
But transparency campaigners said the additional proposals still
don't go far enough.
"The last minute addition of tax havens smacks of window
dressing," said Elena Gaita, a corporate transparency policy
officer at Transparency International, the global anticorruption
group.
"This proposal cannot be called public country by country
reporting, if it does not include most of the world," said Ms.
Gaita.
The proposal will still have to be agreed by EU governments
before becoming law, a process that could take months.
Write to Natalia Drozdiak at natalia.drozdiak@wsj.com
(END) Dow Jones Newswires
April 12, 2016 09:25 ET (13:25 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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