The European Commission is today launching a public consultation on corporate tax transparency in the EU. This consultation aims to find out whether requiring companies to disclose more information about the taxes they pay could help tackle tax avoidance and aggressive tax practices in the EU. For instance, companies could be required to disclose the taxes they pay, in every country where they operate.
The fight against corporate tax avoidance is a top priority of this Commission. The consultation is part of the broader Action Plan for Fair and Efficient Corporate Taxation that is also being presented today. The Commission's work follows through on the commitments made by G20 leaders, who have pledged to ensure that tax authorities freely exchange information about large multinationals, including their country-by-country reporting (CBCR).
Some companies currently generate large profits in the Single Market, but pay little or no tax in the EU.Some multinationals are able to use aggressive tax planning, national mismatches and legal loopholes due to their presence in multiple jurisdictions. Their use of complex corporate structures often puts small and medium enterprises (SMEs) at a disadvantage. It may also distort competition, put smaller rivals at a disadvantage and pit EU and non-EU companies within the Single Market against each other.
Transparency requirements currently exist for banks under the Capital Requirement Directive IV (CRD IV) (IP/14/1229) and for large extractive and logging industries under the Accounting Directive (IP/11/1238, MEMO/13/540), in the form of country-by-country reporting. Today's consultation aims to assess whether extending such public disclosure obligations to multinationals in other sectors could help address tax avoidance.
Requiring a company to disclose more information about its tax affairs - either to tax authorities or to the public through its annual reports - would help shine a light on harmful tax practices. Increased transparency is also likely to incentivise companies to pay their fair share of tax in the country where profits are made. Moreover, greater transparency might encourage Member States to take measures that contribute to more efficient and fairer tax competition. On the other hand, greater transparency requirements without sufficient safeguards may run the risk of sensitive business information being publicised. This could be detrimental to companies, especially if their competitors outside the EU are not following suit. All these factors and others would need to be carefully weighed up when considering whether next steps might be necessary.
The Commission's Action Plan on a Fairer Corporate Tax System, unveiled today, aims to reform corporate taxation in the EU. It sets out a series of initiatives to tackle tax avoidance, secure sustainable revenues and foster a better business environment in the Single Market. Collectively, these measures will significantly improve the corporate tax environment in the EU, making it fairer, more efficient and more growth-friendly.
In September 2013, the G20 also endorsed an action plan to ensure that profits are taxed where profits are generated. The Organisation for Economic Co-operation and Development (OECD) is also coordinating work to tackle Base Erosion and Profit Shifting (BEPS). The BEPS initiative, which is non-binding for Member States, includes recommendations designed to enhance transparency, including the requirement for multinational enterprises to report to tax authorities on a country-by-country reporting (CBCR) basis.
Launch of the public consultation
17 June 2015
Close of the public consultation
9 September 2015
The text of the public consultation can be found here.