Commission Proposes New Plan to Tackle Corporate Tax Dodging

The proposal came as part of a broader plan to counter tax evasion, even since the LuxLeaks scandal was revealed back in 2014. In fact, LuxLeaks exposed deals between multinationals and European authorities to ligally dodge taxes by reducing them.The Panama Papers only presented as a reminder of elite tax evasion, including big corporations and other ambiguous institutions.

The European Commissioner on Financial Stability, Financial Services and Capital Markets Union, Jonathan Hill said “by using complicated tax arrangements, some multinationals can pay nearly a third less tax than companies that only operate in one country. Our proposal to increase transparency will help make companies more accountable”.

A recent study by the European Parliament showed corporate tax avoidance costs EU member states between 50 and 70 billion euros in lost revenues every year.

Initially, the Commission was to propose a so-called country-by-country reporting only for companies activities in each of the 28 EU member states. However, under pressure due to the Panama Papers, the Commission added a last minute requirement, imposing to companies to disclose tax data also in jurisdictions deemed as tax havens. However, member states have never agreed on a common definition/list of tax havens. Also, member states and the European Parliament will have to approve Commission’s proposal to turn them into law.

The plan concerns EU firms with an annual turnover of at least 750 million euros, with activities in the EU. Non-EU firms will also be required to publish a tax report if they have a subsidiary in an EU country. Corporate operations in the rest of the world will have to be reported as a single item.

“If they are paying tax outside the EU in countries, in jurisdiction that don't abide by international good governance standards on tax, the multinationals will have to publish the same detailed information as for the European country” Jonathan Hill said.

However, anti-corruption campaigners said it’s too little, too late. Advocacy group Oxfam held a demonstration on Tuesday in the EU district in Brussels, calling for the disclosure of tax information in all countries where companies operate. Green MEP Molly Scott Cato said “the Commission is only proposing reporting obligations for firms' activities in a restricted list of countries, mainly within Europe, with crucial countries like the US and Switzerland excluded. Unless the reporting obligations cover all countries, it will be impossible to find out if and how firms are channeling funds to tax havens”.

Business associations on the other hand warned that the plan would damage EU companies and called for limiting disclosures to tax authorities, avoiding a general public display.

Meanwhile, the European Parliament’s major groups called Tuesday for the assembly to launch a special investigation regarding the Panama Papers. The name of Miguel Arias Cañete's wife, the Climate Action and Energy Commissioner also came up in the leaked documents.