EU agrees to force multinationals to disclose tax, piling pressure on UK | Tax avoidance

The EU has agreed it will force large multinational companies to publish a breakdown of the tax they pay in each of the bloc’s member states and in tax havens such as Seychelles, piling pressure on the UK government to follow suit.

After years of stalled talks, a deal was struck on Tuesday between EU governments and MEPs on country by country reporting, a policy designed to expose how some of the world’s biggest companies – such as Apple, Facebook and Google – avoid paying an estimated $500bn (£358bn) a year in taxes through shifting their profits.

Under the new rules, companies with global revenues of at least €750m (£645m) over two consecutive years must publicly disclose how much tax they pay in each of the EU member states and in 19 jurisdictions put on black and grey lists who are regarded to varying degrees as being “non-cooperative”.

The data provided will need to be broken down into the nature of the company’s activities, the number of full-time employees, the amount of profit or loss before income tax, the amount of accumulated and paid income tax and accumulated earnings.

Alex Cobham, from the Tax Justice Network, said the EU decision “opens the door” for others to follow. “Such a move is now being considered by the US Congress and the Securities and Exchange Commission, and the legislation already exists in the UK – albeit unused,” he said.

The chancellor, Rishi Sunak, can exercise powers under the Finance Act 2016 to make multinationals’ country by country reporting data public in the UK but the government has said it will only do so if there is an international agreement on the issue.

“The UK has always maintained that it would finally make use of its legislation, on the books since 2016, once there was a multilateral move,” Cobham said. “That move just happened, so there’s no longer any excuse for the UK to hide behind. The will of parliament is clear – the government must now act.”

The idea of large companies reporting their profits publicly had first been tabled by the European commission after the 2014 LuxLeaks scandal exposed the sweetheart deals being offered by Luxembourg, but a majority had been difficult to find among the member states until this year.

There remain a series of loopholes, however, including allowing corporations to withhold information for up to five years if it is considered commercially sensitive. The rules will be reviewed every four years and the limited scope of countries taken in by the policy has been criticised by campaigners.

Sign up to the daily Business Today email

Tove Maria Ryding, Tax coordinator at the European Network on Debt and Development, said: “The so-called EU tax haven blacklist and greylist are deeply flawed political tools, and experience shows that we definitely cannot count on them to include the relevant tax havens.

“At the moment, you will not find Switzerland, or Singapore, or British Virgin Islands or Cayman Islands on the EU blacklist or grey list. Instead, you will find countries and jurisdictions such as Anguilla, Guam, Fiji, Samoa and Thailand, which really are not the big concern when it comes to corporate tax avoidance.”

Sven Giegold, a German Green MEP, said the agreement was a “good compromise” and a “big step today towards full transparency” as other non-EU countries would likely adopt similar laws.

Read The Full Story