Monday 25 June 2018

EU to force businesses to open up the books

A company list showing the Mossack Fonseca law firm is pictured on a sign at the Arango Orillac Building in Panama City
A company list showing the Mossack Fonseca law firm is pictured on a sign at the Arango Orillac Building in Panama City

Sarah Collins in Brussels

Multinational corporations operating in the EU will soon be forced to publish how much tax they pay and where they pay it under new rules designed to clamp down on offshore profit shifting.

The European Commission said yesterday it would require corporations with an annual global turnover of over €750m to publish data on profits and taxes, broken down country by country. It also wants large companies to disclose the location, staff and earnings of their EU subsidiaries and branches, and the total amount of tax they pay outside the EU.

The information would have to be made available online once a year and remain in place for five years.

The rules go beyond regulations introduced here in Budget 2016, that force companies to share similar data with the tax office but not publish it.

The Commission says it wants to even the score between multinationals and smaller firms, which it says pay up to 30pc more tax as they can't afford to hire lawyers and consultants to help minimise their tax bills.

The draft rule change comes after leaked papers from Panamanian law firm Mossack Fonseca showed the extent to which companies and wealthy individuals are squirrelling profits away offshore to legally avoid tax - costing governments an estimated €50bn to €70bn a year in lost revenues. While it has been in the pipeline for some time, last-minute tweaks were made to the legislation to ensure multinationals reveal detailed information on their dealings in Panama and other tax havens featuring on a new EU blacklist.

"The Panama papers have not changed our agenda, but I think they have strengthened our determination to make sure that taxes are paid where profits are generated," the EU's financial services chief, Jonathan Hill, said. EU banks, extractive industries and logging companies are already required to publicly disclose country-by-country data under EU rules.

The latest rule change will catch an additional 6,000 companies, including non-EU banks and computing, retail and consumer giants like Apple, Amazon, Starbucks and Google.

It will have to be approved by a majority of EU countries and by the European Parliament before it can become law.

Ireland will not have a veto on the legislation as it concerns accounting law and not tax law. Accounting laws require a majority vote, while tax laws require a unanimous vote.

EU officials say the legislation could be agreed as early as end-2017. The rules do not affect Ireland's 12.5pc corporate tax rate. However, the EU will bring in new rules later this year on how corporate taxes should be calculated, known as the "common consolidated corporate tax base".

Irish Independent

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