European Parliament Committee sets the tone for Europe’s debate on multinational transparency

Associations, Bribery and Corruption, Claims, Corruption, European Union, Maritime Fraud, Organisations, Politics and Government — By on May 7, 2015 at 11:29 PM
Koen Roovers

Koen Roovers

AMID PUBLIC OUTCRY ON TAX DODGING, PARLIAMENTARIANS RESPOND WITH CONCRETE MEASURES TO LEVEL THE PLAYING FIELD

In another move that places Europe at the forefront of the financial transparency wave, the Legal Affairs (JURI) Committee of the European Parliament voted in favor of a Shareholders Rights Directive that includes a requirement for multinational corporations (MNCs) to publicly report financial information on a country by country level.

“Up until now, we’ve had to rely on leaks, whistleblowers, and secret documents to learn if a multinational is engaging in aggressive tax planning and profit shifting, ” said Koen Roovers, Lead EU Advocate for the Financial Transparency Coalition. “But today’s vote brings the transparency Europe needs closer to reality.”

In the wake of the LuxLeaks scandal, which exposed hundreds of MNCs that had entered into secret tax deals with the government of Luxembourg, there has been a renewed public focus on corporate transparency and tax dodging.

Public country by country reporting (CBCR) would require MNCs to disclose things like the amount of profit made, taxes paid, revenue generated and number of employees for each country where a subsidiary operates. Right now, MNCs report on their operations in one consolidated global report, without any way of discerning country specific operations.

“This kind of detailed corporate reporting can help to flag up possible corruption by shedding a light on special arrangements between companies and governments.” said Nienke Palstra, Senior Policy Officer with Transparency International EU. “It will also improve the accountability of companies to the citizens of the countries where they make their profits.”

The vote comes as the European Commission begins an assessment of the benefits of CBCR as part of the EC’s tax transparency package. The package also called for the exchange of tax rulings between European countries, something that’s currently kept secret. Some sectors of the economy already have to report this information.

“Large European banks are already making this information available to the public and this is not having any negative impact on their competitiveness”, says Catherine Olier, Oxfam’s EU policy advisor. “If banks are opening their own books, why shouldn’t other big companies do the same at a time when European citizens are fed up with unfair corporate tax dodging?”

“Companies that are operating in one jurisdiction already report this type of information, so it’s not only a question of transparency, ” said Tove Ryding, Eurodad’s tax justice advocacy manager. “It’s about creating a level playing field between small and medium enterprises and their transnational competitors, ” added Ryding.

Tax authorities aren’t the only ones that want this information, either. Investors need the very same knowledge; knowing if a corporation is operating in unstable areas, using tax havens, or engaging in the type of aggressive tax planning that can ruin a reputation are vital to making sound business investments.
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  1. The vote comes as the European Commission begins an assessment of the benefits of CBCR and in the wake of the EC’s tax transparency package, which called for the exchange of tax rulings between European countries, something that’s currently kept secret. Some sectors of the economy already have to report this information.
  2. The ALDE group invoked a rule of procedure at the end of the vote, requesting to send the report to plenary. The European Parliament’s leadership, the Conference of Presidents, will decide whether or not to put it on the agenda.
  3. The European Parliament has repeatedly called for greater transparency around the activities of multinational corporations, for instance in the 2014 Tax Report (rapporteur Kaili) that was adopted in March this year and the report on the Fight against Tax Fraud, Tax Evasion and Tax Havens (rapporteur Kleva-Kekuš) of May 2013.
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