Transparency International is calling on European Commission President Jean-Claude Juncker to publicly support legislation that would allow citizens to scrutinise the corporate taxes paid by multinational companies to governments. President Juncker will appear tomorrow in front of a special tax committee  at the European Parliament to defend the Commission’s track record on tackling tax avoidance.
Juncker will appear before the European Parliament committee on Tax Rulings and Other Measures Similar in Nature or Effect (TAXE), which was set up following revelations that Luxembourg authorities had approved the aggressive tax avoidance strategies of hundreds of multinational companies. President Juncker was the Finance Minister and Prime Minister of Luxembourg for 18 years before being appointed Commission President.
The revelations by the International Consortium of Investigative Journalists (ICIJ) – acting on information from a whistleblower (“LuxLeaks”) – showed that over 300 multinational companies had received assurances from the Luxembourg authorities on the legality of schemes that enabled them to minimise their global tax bill . The arrangements were not disclosed to the wider public.
“We are only now seeing action from the EU on practices that are widely considered abusive thanks to the work of whistleblowers and journalists”, said Carl Dolan, Director of Transparency International EU. “But it should not be necessary for people to risk their careers and reputations to get this information into the public domain. Good governance and common sense demands that European citizens should know basic information about companies’ tax payments to their governments. President Juncker should unequivocally endorse this principle in front of citizens’ representatives tomorrow”.
Under the current system, EU-based multinational companies are not required to disclose information regarding their activities and the taxes they pay in each country where they operate. Transparency International is calling for EU legislation that would require companies’ disclosure of key financial data in every country where they operate (on a “country-by-country basis”). This an important tool for countering tax avoidance and highlighting cases of multinational companies that receive more favourable tax treatments, which in some cases will help flag corruption risks.
In particular, this reporting would have a positive impact on developing countries’ tax revenues, as they are currently losing more resources due to corporate tax avoidance than they receive as official development assistance. This year’s World Investment Report by the UN Conference on Trade and Development (UNCTAD) estimates developing countries’ revenue losses to multinational tax abuse at US$100 billion per year .
In July, the European Parliament already voted in favour of measures requiring large European companies to publicly disclose tax-related information as part of the review of the Shareholders’ Rights Directive , while the European Commission is currently analysing the results of its recent public consultation on corporate tax transparency , which will feed into its impact assessment on possible EU legislation.
For more information on country-by-country reporting, read Why Public Country-by-Country Reporting for Large Multinationals is a Must (04/052015).
- European Parliament’s TAXE committee: Draft report of the special committee on tax rulings and other measures similar in nature or effect (20/07/2015).
- Transparency International EU: Luxleaks: EU finance ministers must act on tax transparency (06/11/2015).
- UNCTAD: World Investment Report 2015.
- Transparency International EU: All eyes on Luxembourg Presidency as European Parliament votes for tax transparency (08/07/2015).
- See Transparency International’s submission to the European Commission’s consultation on corporate tax transparency (09/09/2015).