EU Tax Code Derided as a 'Parody of Transparency'

EU finance ministers in March agreed to make the largest corporations operating in the EU report their activities to tax administrations. It follows a serious of rulings and investigations by the European Parliament and Commission.

However, critics say the new tax arrangement — for multinationals with a total consolidated group revenue of at least US$847 million — will only involve passing tax information between member states' tax agencies and will not be made public or available to journalists.

Campaign group Transparency International says the country-by-country reporting (CBCR) scheme is further flawed in that companies will only be required to publish information on a CBCR basis for activities in EU Member States.

"For the rest of the world, including tax havens outside the EU, companies will only have to disclose an aggregate figure which undermines the legislation. Multinationals will still be able to shift their profits outside the EU without anyone being able to monitor where they are located, what they are doing and what they give to governments in the form of taxes or other payments. If a CBCR system only applies to 28 countries and leaves out 168, it cannot be called CBCR," the campaign group said.

Details Missing

The group also says the CBCR scheme does not go into enough detail. "What's missing from this proposal are assets, sales and purchases, public subsidies received, and a list of subsidiaries. We have strongly advocated for the inclusion of both public subsidies and payments to governments in the legislation, as these are important elements to raise flags on potential corruption cases and collusion between governments and corporations.

"Despite strong rhetoric, the EU has made little in the way of progress on real corporate tax transparency. The European Commission's long-awaited leaked draft proposal fails to deliver and is a parody of transparency," it said.

In January 2016, the European Commission branded the Belgian "excess profit" tax scheme illegal under EU state aid rules and ordered the country to recover the US$760 million unpaid tax from the companies concerned, most of which are major multinationals.

In October 2015, the Commission ruled that Luxembourg and the Netherlands have granted selective tax advantages to Fiat and Starbucks, respectively. The Commission also has three ongoing in-depth investigations into concerns that tax rulings may give rise to state aid issues, concerning Apple in Ireland, Amazon in Luxembourg and McDonald's in Luxembourg.

The investigation into Ireland's tax treatment of Apple is ongoing. Last December the Commission opened an investigation into Luxembourg's tax deal with McDonald's.