Paperjam.lu

The Portuguese presidency of the Council of the EU took charge of country by country reporting. Pictured here a roundtable meeting of the Competitiveness Council in February, attended virtually by economy minister Franz Fayot. Photo: European Union 

Firms with revenues of more than €750m in both of the last two years will be required to submit certain tax information to every member country where they operate, regardless of whether they are domiciled in the EU. The information includes the company’s number of employees, accumulated earnings, net sales and profits, and income taxes paid.

Companies operating in the EU’s “black list” of tax havens (Dominica, Seychelles, American Samoa, and others) are also implied, as well as those operating in the EU’s so-called “grey list”, which includes Turkey.

The directive seeks to recoup tax revenue lost to EU countries, an amount upwards of €50m per year, said the presidency of the Council of the EU in its press release. The provisional agreement came the same day the EU launched the European Tax Observatory, which aims to curb tax evasion and avoidance by supplying research and analysis to policymakers.

In Luxembourg--home to several large multinational corporations--the economy ministry said in a statement to Delano: “The inter-institutional agreement in the public CbCR case is good news for transparency at EU level, although given the substance of the case, it would have been better if the discussions had been held on the level of the European ECOFIN [economic and financial affairs, editor’s note] council. The experts now need to analyse the compromise in detail before being able to comment on the case definitively.” 

Economy minister Franz Fayot (LSAP) during a February EU meeting said Luxembourg would not stand in the way of the initiative.

Tilly Metz--Green MEP for Luxembourg--expressed her support for the initiative via Twitter. MEP Marc Angel (LSAP/S&D), called the outcome of negotiations “good job” via Twitter on 1 June. Christophe Hansen (CSV/EPP) said: “I welcome that tax avoidance strategies will be way harder to implement,” adding that the agreement would give companies legal certainty moving forward.

“At a time when our citizens are struggling to overcome the effects of the pandemic crisis, it is more crucial than ever to require meaningful financial transparency regarding such practices,” said Pedro Siza Vieira, Portuguese Minister of State for the Economy and Digital Transition.

Sven Giegold, a member of the European Parliament and Speaker of the German Green delegation, hailed the development as a milestone accomplishment, calling Europe a “global pioneer for tax transparency.”

He conceded that a weakness of the agreement was its limited scope, since it only affects operations in member states and certain tax havens but said: “Europe is built on compromise and this is a very good one. Intra-European tax transparency can now trigger a global dynamic. Other countries can easily follow the EU’s example.”

He singled out business associations as a primary obstacle to the directive’s progress, commenting that they “have lobbied to uphold unfair competition—against the interests of their smaller members.”

Not everyone shared Giegold’s optimism, however. Tove Maria Ryding, tax coordinator at the European Network on Debt and Development (Eurodad), called it “a sad day for the EU’s fight against corporate tax avoidance.”

The agreement, she said, “is not real country-by-country reporting. Most of the world’s countries are not covered by the disaggregated reporting, which means they will become black spots on the map, and there is a high risk that multinational corporations will use those countries to hide profits.”

“Almost meaningless” was how Elena Gaita, senior policy officer of NGO Transparency International EU, put it.

Under the agreement, commercially sensitive information may be withheld for up to five years. The European Parliament managed to lower that requirement from the proposed six years.

Ryding dismissed the entire clause as a loophole: “The experience we have with public country-by-country reporting for banks shows that the only sensitive information which gets revealed is data showing that corporations are continuing to shift their profits to low-tax jurisdictions.”

The text has not yet undergone the full approval and adoption process of the council and the European Parliament. If it does, member states will have eighteen months to transpose the directive into national law.

Updated on 3 June at 2.05pm to include the statement from the economy ministry.