Tuesday, June 1st, 2021
EU representatives agree
Companies in the EU are threatened with tougher tax regulations
Some large corporations are moving profits to countries with low tax rates to reduce payments to the tax authorities. Stricter EU rules should prevent this, EU negotiators agree. Financial experts see this as a “milestone for tax justice”.
In the future, large companies in the European Union will have to disclose how much taxes they pay in which country. Negotiators from the EU states and the European Parliament agreed on rules for so-called country-by-country reporting. This was confirmed by participants from the German Press Agency in Brussels. The project is intended to help limit companies’ tax-saving models. A five-year dispute ends with the agreement.
The EU Commission had already made the proposal to change the accounting in 2016. The country-by-country rules are intended to apply to multinational companies with a turnover of more than 750 million euros worldwide. In a country-specific report, they should publish, among other things, the net sales, profit or loss before taxes and the income taxes actually paid. The data should be broken down for all EU countries. This also applies to countries on the so-called black list of tax havens and to countries that have been on the so-called gray list for at least two years in a row, currently Turkey for example.
“The agreement is a milestone for tax justice in Europe,” said the Green finance expert Sven Giegold after the agreement. “Country-based tax transparency is a sharp sword against tax avoidance. When large companies have to disclose their profits and taxes paid per business country, tax dumping becomes visible to everyone every year.” That will damage the reputation of the companies, said the MEP. In this way, Europe will become a pioneer in tax transparency worldwide.
Some large companies use subsidiaries to shift profits to countries with the lowest possible tax rates and thus reduce payments to the tax authorities. This happens within the EU, but also worldwide.
The European Parliament had already campaigned for public country-by-country reporting in 2017 and determined its negotiating position. However, after years of debate, the EU states only accepted the principle this spring with the necessary majority. Germany abstained. In the negotiations with the European Parliament, the final details of the plan were discussed. In anticipation of an agreement, EU Finance Commissioner Paolo Gentiloni said in the morning: “It’s a step forward, of course you can never achieve everything you want.”
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