Thursday, June 17

The EU will force multinationals to publish how much taxes they pay in each country

The European Parliament.

The European Parliament.

The governments of the European Union and the European Parliament have reached this Tuesday a political agreement to demand greater transparency from multinationals, which will be forced to publish their benefits and how many taxes they pay in each country of the bloc and in those jurisdictions that are part of the European list of tax havens.

The measure, which It will affect all those European companies or subsidiaries of foreign companies that have a consolidated net turnover of at least 750 million euros per year, will require multinationals to make public data such as the number of employees, their income, their profits or losses before taxes, taxes paid and net profits.

All this information will have to be individual for each country of the European Union and also when the company operates in a jurisdiction included in the ‘black’ and ‘gray’ lists of tax havens in the EU. For the rest of the world, business groups will be able to present the information in aggregate form.

The geographical scope of the measure has been precisely the point that has divided the negotiators of the European Chamber and the Member States, represented by the government of Portugal as the rotating presidency of the EU.

“Although we strongly regret that the Council (the countries) rejected a country-by-country publication on a global scale, the agreement reached is an important step towards greater fiscal transparency and includes a series of improvements,” the PSOE MEP Ibán García, one of the two negotiators of the European Parliament.

The agreement, in any case, includes a review clause according to which both the income threshold can be modified within four years (the 750 million euros in revenue) as the geographical area in which the transparency requirements apply. The European Parliament trusts that it will serve to toughen the provisions agreed on Tuesday.

The origin of the legislative proposal dates back to April 2016 and is part of the efforts of the European Commission then chaired by Jean-Claude Juncker to respond to scandals such as the Panama Papers or the tax agreements that countries such as Luxembourg or The Netherlands negotiated with large firms.

The initiative, however, had been blocked by the Member States until February this year, when the necessary majority met between the capitals to be able to start negotiations with MEPs. They voted against Ireland, Sweden, Cyprus, Hungary, Malta and the Czech Republic, but did not prevent the proposal from moving forward.

In the background there is a debate about the legal nature of the legislative initiative: the European countries that have most opposed it argue that, as it is a tax proposal, it must be approved unanimously by the capitals.

This would grant the right of veto to governments that oppose the changes, but the European Commission, the European Parliament and the rest of the countries insist that, by not modifying European fiscal rules and only addressing the transparency of multinationals, it can be approved by a qualified majority.

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