EU Council backs corporate tax transparency directive

Public Country-by-Country Reporting:

On 25th February, a majority of European Council members supported the EU corporate tax transparency directive (so-called public country-by-country reporting) in an important step towards tax transparency.

This directive is aimed at addressing tax avoidance and ending the secrecy surrounding multinational corporations’ overseas operations and accounts.

Julia Sánchez, Secretary General of ActionAid International, says:

“This is a major step towards tax transparency. Developing countries lose more than US$100 billion a year due to multinationals’ tax dodging.

This is robbing communities of vital revenue for public investment in health, education, climate action and other public services that support women, girls and other marginalised groups.”

“Bringing transparency to the accounts of multinational companies will allow governments, the media, civil society and researchers to scrutinize the tax bills of these corporations and demand they pay taxes where they make their profits.”

Recent ActionAid research revealed how 20 developing countries could be missing out on as much as US$2.8 billion in tax revenue from Facebook, Alphabet Inc. and Microsoft due to unfair global tax rules. This directive will allow for better scrutiny of corporate tax tricks in the future.

Ireland’s position:

Ireland was one of the few Member States to oppose these modest transparency directives.

Ireland objected to the legal basis saying it needs “the benefit of tax expertise” and should go through the Economic and Financial Affairs Council as opposed to the Competitiveness Council. However, this directive has no impact on the tax rate, tax base or tax sovereignty of any jurisdiction.

ActionAid Ireland Chief Executive, Siobhán McGee, says:

“ActionAid Ireland has been campaigning on this matter since 2015 and we welcome the introduction of these transparency measures.

It is clear the public agrees – with our petition receiving thousands of signatures in a few days.

This is a huge step towards challenging tax dodging and ensuring multinational companies pay their fair share – especially in the Global South.”

Next Steps:

The directive will now continue to be negotiated between the European Council, European Commission and the European Parliament to decide critical elements of the legislation. 

ActionAid is calling for reporting information to be listed separately for each tax jurisdiction across the world where a company has economic activity. This will allow developing countries to access information about the profits made by multinationals and see how much tax they pay compared to the resources they extract.

Secondly, ActionAid is calling on the directive to cover all multinationals which are considered by the EU as having a ‘large undertaking’ with a threshold of €40 million in net annual turnover. The current draft has a suggested threshold of €750 million. We believe this figure is too large and could result in big companies getting away with hiding their profits and tax practices.

For years, corporations were allowed to shift billions in profits to tax havens without public scrutiny. While there is a long journey ahead to ensure the legislation is strong and effective, we have now begun an important journey from secrecy to transparency.