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 financial data is published annually in a consolidated financial statement. This allows some companies to obscure their presence in jurisdictions with low- or zero tax rates, use legal loopholes to hide their profit-shifting practices aimed at reducing their tax bills, and avoid public scrutiny and accountability altogether.
The current system makes it impossible to understand what is happening within a group of companies from a tax perspective and track their contributions to the societies they operate in. On top of this, as many of the recent corporate scandals have shown, acts of corruption are very often aided by the use of opaque company structures and secrecy jurisdictions. The use of offshore companies and their lack of transparency pose increasing risks for local communities, a healthy business environment and society at large.
What are we doing?
The EU can put an end to multinationals’ secrecy by adopting mandatory legislation on corporate tax transparency, requiring companies to publish key financial information on a country-by-country basis, so called public “country-by-country reporting” (CBCR).
Transparency International EU is currently focusing its efforts on an advocacy campaign aimed at adopting EU legislation on corporate and tax transparency.
The primary purpose of this legislation is to increase corporate accountability and transparency by providing citizens with adequate information to assess multinationals’ economic activities, payments, structures and whereabouts. Basic information on where companies are located, how many people they employ, what profits they make and how much they pay in tax is crucial to achieve this objective.
This campaign builds on previous work Transparency International EU has done in the extractive and banking sectors.