BRUSSELS (Reuters) - Large companies would have to publicly disclose tax and financial data under proposals the European Commission put forth on Tuesday, in an effort to eliminate tax schemes costing European Union states billions of euros in lost tax revenues.
The EU executive’s proposal is part of a broader plan to counter tax avoidance triggered by the LuxLeaks scandal in 2014, which exposed deals by multinationals with EU authorities to reduce their tax bills.
“By using complicated tax arrangements, some multinationals can pay nearly a third less tax than companies that only operate in one country,” EU Financial Services Commissioner Jonathan Hill said in a statement. “Our proposal to increase transparency will help make companies more accountable.”
A European Parliament study showed that corporate tax avoidance costs EU countries 50 billion to 70 billion euros in lost revenues every year.
The Commission had initially planned to impose so-called country-by-country reporting only for companies’ activities in each of the 28 EU states.
But under pressure after the recent Panama Papers leaks, it made a last-minute change to its proposal, requiring corporations to disclose tax data also in jurisdictions deemed as tax havens - although EU states have never agreed on a common list of tax havens.
Corporate operations in the rest of the world will have to be reported as a single item.
The plan concerns only companies with an annual turnover of at least 750 million euros ($856.65 million) and with activities in the EU. Non-EU firms will also be required to publish a tax report if they have a subsidiary in an EU country.
Data to be made public on a country-by-country basis include tax paid and tax accrued, profits, turnover, earnings and number of employees.
EU states and the Parliament need to approve the Commission’s proposals to turn them into law.
The proposed measures raised concerns among anti-corruption campaigners, who accused Brussels of being too soft on tax evasion. Business associations warned that the plan would damage EU companies.
“We do not wish to see the EU become a destination which businesses consider too reputationally risky and administratively burdensome in which to invest,” said Chas Roy-Chowdhury, head of tax at ACCA, a global accounting body.
He called for limiting disclosures to tax authorities, avoiding a general public display.
“Competitors will acquire sensible information on the structure and margins of a company due to the obligation of reporting”, said Markus Kerber, chief of the German industry association BDI. Center-right lawmakers shared those concerns.
But tax transparency activists and center-left lawmakers accused the Commission of not going far enough. Advocacy group Oxfam held a demonstration on Tuesday against tax havens in the EU district in Brussels, calling for the disclosure of tax information in all countries where companies operate.
“The Commission is only proposing reporting obligations for firms’ activities in a restricted list of countries, mainly within Europe, with crucial countries like the US and Switzerland excluded,” EU Green lawmaker Molly Scott Cato said.
“Unless the reporting obligations cover all countries, it will be impossible to find out if and how firms are channeling funds to tax havens,” she said.
Reporting by Francesco Guarascio; additional reporting Tom Korkemeier, editing by Larry King