According to the new proposal announced by the European Commission on Tuesday (12 April), multinational corporations doing business in Europe will be required to publish country-by-country information on the taxes they pay. This would include reports on the nature of their activities and personnel, their net turnover, profit before tax, amount of tax due based on annual profits, the amount of tax they actually pay in a given year and their accumulated earnings.
The proposal comes at an especially auspicious time when the public is outraged by the Panama Papers about the usage of tax havens by multinationals to reduce their taxes. According to the new regulations, corporations with annual global revenues of more than $750 million will have to disclose their taxes in key areas. The same rules would be applied to non-EU multinationals operating in Europe. Both EU and non-EU corporations will have to report the total amount of taxes paid outside the block under the new rules. The EU defines multinationals in line with the OECD’s approach covering more than 6,500 businesses and 95 percent of multinational revenues.
Commissioner Jonathan Hill assured that the new proposal would not affect small and medium-sized businesses, saying the proposal was “the wish to protect the competitive position of SMEs”. He added that “it should not be the case that smaller companies, which are not able to shift their profits, or cannot afford clever tax advice to minimize their bills, it is not right that they are at a competitive disadvantage to big multi-nationals.” Mr Hill reiterated that the true objective of the new tax rules was to make sure that multinationals pay their taxes where they make profit. It is estimated that corporate tax avoidance costs the EU about €50-70 billion annually.