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European Commission’s new proposal on corporate tax avoidance does not deliver real transparency

Author
Alex Johnson
Date
28 January, 2016
Type
Press Release
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The European Commission’s new proposal on corporate tax avoidance does not deliver real transparency, according to Transparency International. The EU must live up to its rhetoric on tax transparency and bring about public reporting of multinational profits, taxes and other information, as is already the case in other sectors, according to the group.

Public country-by-country reporting (CBCR) is in place for the banking sector and it has revealed that five of the world’s largest banks have been avoiding tax in the UK. Public CBCR demonstrates how much multinationals pay in taxes and reveals “sweetheart deals” with governments, which can help flag corruption risks.

The Commission’s new Anti-Tax Avoidance Package aims to implement the OECD’s plan on Base Erosion and Profit Shifting (BEPS), which stops short of public disclosure of key financial data for multinationals and would cover only 10% of companies. Recent State Aid rulings by the Commission against Belgium, the Netherlands and Luxembourg show the need for transparency in multinationals’ tax practices, according to the NGO. It is estimated that the EU loses around 50 – 70 billion Euro every year due to corporate tax planning.

The Commission’s proposal only deals with part of the problem. Multinationals’ financial information will be provided just to tax authorities while citizens, journalists and policy-makers will still be kept in the dark. Citizens have a right to know how much companies contribute to the societies they operate in,” said Elena Gaita, Policy Officer on Corporate Transparency at Transparency International EU. “It seems bizarre that one hand of the Commission spends so much time investigating tax rulings when another hand could save the hassle and simply make corporate tax practices transparent,” Gaita continued.

The LuxLeaks revelations in November 2014 uncovered special tax arrangements between multinationals and Luxembourgish authorities to lower global corporate tax bills. Transparency International is calling for CBCR of multinationals’ key financial data including profits and taxes for each country they operate in.

The Commission will have further opportunities to propose public disclosure of corporate financial data in the coming months and we strongly urge them to do so,” concluded Gaita.

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Corporate Accountability

What is the problem? In the current international financial system, multinational companies are under no legal obligation to disclose this information regarding their activities, profits and the taxes they pay in each country of operation. Key...

Want to know more? Get in touch

Elena Gaita

Policy Officer – Corporate Transparency
egaita@transparency.org