29 November 2019

Yesterday, twelve European Union (EU) countries, have blocked a new directive that would require multinational companies to reveal how much profit they make and how little tax they pay in each of the EU’s 28 member states. Tax-dodging companies deprive national coffers of between €50 billion and €70 billion a year, the European Commission said.

ICRICT considers that this decision shows that these 12 countries are still putting the interests of multinationals above those of EU citizens. But the pressure for more transparency remains and we are as close as we have ever been to have public country by country reporting in the EU.

Support for the reform is strong, but yesterday's vote shows once again that the current EU decision making process is slowing down real reforms and where the interests of some countries lie. Most of the countries that opposed yesterday's vote want the decision on public country by country reporting to be decided through unanimity, which would basically allow even one single tax haven to block it. 

The voting system on tax matters, which today requires unanimity, is unworkable and needs changing, to allow for much needed reforms such as the EU Common Consolidated Corporate Tax Base (CCCTB).

Thomas Piketty, Professor at the Paris School of Economics, and a member of ICRICT said:

“The way decisions are made regarding tax issues could be improved within the EU. The unanimity rule makes it difficult to progress, and this will have to be changed. If some countries don’t want to change the system, at some point I think that the countries who are willing to go ahead should change it without the others. We have to be pragmatic and not wait for unanimity to make progress. We must realize that we won’t have unanimity to get rid of unanimity and therefore, some countries should go ahead with whoever wants to. In the meantime, it might imply sanctions or appropriate measures with respect to those who don’t want to cooperate and try to benefit from financial opacity”.

 Eva Joly, an ex-Member of the European Parliament, and a member of ICRICT, said:

“The masks are falling. It is clear now that there are EU Member States that have no political will to tax these multinationals! They intend to maintain their position as receivers of tax products diverted to the detriment of other Member States. It is an infringement of the principle of loyalty, which is enshrined in the Treaty”.

The proposed rule was designed to shine a light on how large companies avoid paying an estimated $500bn a year in taxes around the world by shifting their profits from higher-tax countries such as the UK, France and Germany to zero-tax or low-tax jurisdictions such as Luxembourg, Ireland and Malta. It would also country-by-country reporting mandatory for companies with an annual turnover of more than €750m.  The vote comes more than three years after the European commission promised to expose multinational corporations’ tax avoidance measures following the Panama Papers revelations.

The 12 EU states are Luxembourg, Malta, Cyprus, Latvia, Slovenia, Estonia, Austria, Czech Republic, Hungary, Croatia, Ireland, and Sweden. Germany abstained, and the UK did not vote.

Read our latest report about how to change the way multinationals are taxed, with solutions that are in the interest of both developed and developing countries

For any enquiries, or to speak with one of our 15 commissioners, or ICRICT Head of Secretariat TOMMASO FACCIO,

Please reach LAMIA OUALALOU at loualalou@gmail.com or by WhatsApp +52 1 55 54080974.

ABOUT ICRICT:

The Independent Commission for the Reform of International Corporate Taxation (ICRICT) aims to promote the international corporate tax reform debate through a wider and more inclusive discussion of international tax rules than is possible through any other existing forum; to consider reforms from a perspective of public interest rather than national advantage; and to seek fair, effective and sustainable tax solutions for development.