Parliamentarians in Strasbourg have this week voted to introduce new rules that would enforce multinational companies operating in the EU to publish details of their profits on a country-by-country basis. The legislation is part of an overall campaign to reform broader tax regulation in an effort to cut down on multinational tax avoidance.
Similar laws already exist for the banking sector, but MEPs extended the rules to cover all multinationals that operate in Europe. This will result in companies having to publish details of their profits in each country, even those outside the EU, along with their real activity in those countries. Tax authorities and campaigners hope that this will allow them to see whether profits are being shifted from one jurisdiction to another as a way to minimize companies’ tax liabilities.
Although the legislation is stronger than the original first proposed by the Commission last year in April, one loophole remains. Multinationals will be able to escape some reporting of activity if they believe it will risk any trade secrets. The inclusion of the safeguard clause was pushed to be included by centrist and right-wing politicians who felt that complete transparency would damage the competitiveness of European companies. The leader of the Parliament’s Greens Group dismissed such claims, arguing that “‘competitiveness’ is just code for ‘reputation'”.
Compliments of Vulcan Consulting – a member of the EACC .