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| EU tax transparency plans won't work, say campaigners | EU tax transparency plans won't work, say campaigners |
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| Draft legislation from the EU designed to make large multinational companies such as Google, Ikea and Amazon publicly disclose their earnings and profits has been lambasted by tax justice campaigners who say the text could allow such firms to continue doing business as usual. | Draft legislation from the EU designed to make large multinational companies such as Google, Ikea and Amazon publicly disclose their earnings and profits has been lambasted by tax justice campaigners who say the text could allow such firms to continue doing business as usual. |
| Related: EU proposals will force multinationals to disclose tax arrangements | Related: EU proposals will force multinationals to disclose tax arrangements |
| According to the draft legislation seen by the Guardian, public disclosure of turnover, profits and numbers of employees will only be made compulsory for tax jurisdictions “within the EU”. Data for companies doing business in the EU but with operations outside of the 28-member bloc will not have to be disclosed. | According to the draft legislation seen by the Guardian, public disclosure of turnover, profits and numbers of employees will only be made compulsory for tax jurisdictions “within the EU”. Data for companies doing business in the EU but with operations outside of the 28-member bloc will not have to be disclosed. |
| The end result could mean multinational businesses with a subsidiary in low-tax jurisdictions such as Switzerland and the Bahamas could still shift profits abroad and avoid paying taxes in the country where they do business. | The end result could mean multinational businesses with a subsidiary in low-tax jurisdictions such as Switzerland and the Bahamas could still shift profits abroad and avoid paying taxes in the country where they do business. |
| “Not having to report on their operations for the rest of the world means that citizens will be in the dark about multinationals’ activities – unable to monitor where they are located, what they are doing and what they pay to governments in the form of taxes or other payments,” said Elena Gaita, EU policy officer for Transparency International. | “Not having to report on their operations for the rest of the world means that citizens will be in the dark about multinationals’ activities – unable to monitor where they are located, what they are doing and what they pay to governments in the form of taxes or other payments,” said Elena Gaita, EU policy officer for Transparency International. |
| While the text could still be altered in the coming days and weeks, tax justice campaigners say the initial draft bill is a major blow to the commission’s claims that it wants to implement full, public country-by-country reporting in Europe. Such reporting is seen as particularly important because, without it, large companies are more able to make secretive deals with governments on where and how they declare their profits. | While the text could still be altered in the coming days and weeks, tax justice campaigners say the initial draft bill is a major blow to the commission’s claims that it wants to implement full, public country-by-country reporting in Europe. Such reporting is seen as particularly important because, without it, large companies are more able to make secretive deals with governments on where and how they declare their profits. |
| For example, companies such as Amazon, British American Tobacco, Ikea and Vodafone, which do business in the EU, would not have to declare any data from branches of their companies based in Switzerland, which is outside the union. | For example, companies such as Amazon, British American Tobacco, Ikea and Vodafone, which do business in the EU, would not have to declare any data from branches of their companies based in Switzerland, which is outside the union. |
| “This does not solve the problem, as it means the profits could go somewhere else and never be recorded,” said Tove Maria Ryding, tax justice coordinator for the European Network on Debt and Development (Eurodad), a group of 46 NGOs fighting for a fairer global financial system. “According to conservative estimates, the EU is losing €50-70bn per year because multinational corporations are not paying their taxes. Hopefully, the European commission will soon start to take this problem seriously and propose real solutions.” | “This does not solve the problem, as it means the profits could go somewhere else and never be recorded,” said Tove Maria Ryding, tax justice coordinator for the European Network on Debt and Development (Eurodad), a group of 46 NGOs fighting for a fairer global financial system. “According to conservative estimates, the EU is losing €50-70bn per year because multinational corporations are not paying their taxes. Hopefully, the European commission will soon start to take this problem seriously and propose real solutions.” |
| Campaigners for a fairer tax system in Europe also say they are bewildered by the commission’s draft proposal, as the EU has already introduced a system for public country-by-country reporting for banks. | Campaigners for a fairer tax system in Europe also say they are bewildered by the commission’s draft proposal, as the EU has already introduced a system for public country-by-country reporting for banks. |
| Moreover, the proposal also suggests that public reporting should only apply to companies with minimum turnover of €750m a year. In reality, this would mean that 85-90% of the world’s multinational corporations would not have to report anything at all, according to Eurodad. | Moreover, the proposal also suggests that public reporting should only apply to companies with minimum turnover of €750m a year. In reality, this would mean that 85-90% of the world’s multinational corporations would not have to report anything at all, according to Eurodad. |
| Outrage over how the multinationals minimise their tax liabilities in Europe erupted in 2014 as a result of the Luxleaks revelations, when the Guardian and other publications revealed how hundreds of global companies including Pepsi, Ikea and FedEx had secured secret sweetheart tax deals with Luxembourg, allowing them to save billions of euros in taxes. | |
| The commission meanwhile is defending its stance. A draft memo attached to the legislation and seen by the Guardian states that the risk of generating further tax conflicts and double taxation – whereby taxes are levied by two or more jurisdictions on the same declared income – will be limited under the draft, as the tax information will only be broken down within the EU where more efficient dispute mechanisms are in place. | |
| However, tax justice campaigners say this argument is flawed, as banks, which already have to disclose their profits in jurisdictions outside the EU, have confirmed that double taxation is not a risk and that the obligation to report on a country-by-country basis has not harmed their commercial interests. | However, tax justice campaigners say this argument is flawed, as banks, which already have to disclose their profits in jurisdictions outside the EU, have confirmed that double taxation is not a risk and that the obligation to report on a country-by-country basis has not harmed their commercial interests. |
| A commission source aware of the draft text said the reason multinationals will not be made to break down their profits in countries outside the EU was not to put European firms at a competitive disadvantage compared to businesses from other regions such as China and the US. | A commission source aware of the draft text said the reason multinationals will not be made to break down their profits in countries outside the EU was not to put European firms at a competitive disadvantage compared to businesses from other regions such as China and the US. |
| The official also said the fact aggregated data must still be applied for profits generated in non-EU countries should still be enough to apply public pressure. | |
| “We are exposing our companies but we want to make sure we’re balanced,” the official said. | “We are exposing our companies but we want to make sure we’re balanced,” the official said. |
| The commission has refused to comment on the draft, though Lord Hill, the EU’s commissioner for finance services, said in a statement: “Our goal is to encourage responsible behaviour through more transparency. Under our proposal, anyone interested would then be able to see how much tax the largest multinationals operating in Europe pay.” | The commission has refused to comment on the draft, though Lord Hill, the EU’s commissioner for finance services, said in a statement: “Our goal is to encourage responsible behaviour through more transparency. Under our proposal, anyone interested would then be able to see how much tax the largest multinationals operating in Europe pay.” |