European Parliament approves country-by-country reporting for multinationals

Multinationals with a turnover of at least 750 million euros will have to state publicly how much tax they pay in each European country, how much profit they generate, how much subsidy they receive and how many people they employ.

The European Parliament gave the green light to the country by country report on Tuesday. The text provides for a derogation clause allowing companies not to publish sensitive commercial information.

The measure should increase the transparency of companies. Hugues Bayet (SP), the Belgian rapporteur for the case, wanted the requirement to apply to all companies with a turnover of at least 40 million euros, but the limit was finally placed much higher. Approximately one out of ten multinational companies has a turnover of 750 million euros.

Nor is the requirement for transparency absolute. Member States may decide to allow undertakings not to disclose sensitive commercial information. Such a derogation must be submitted to the European Commission – which may refuse it – and it must be renewed each year.

The reaction from non-governmental organisations (NGOs) on Tuesday was lukewarm. “The move, which is guided by the lobbies on fraud and tax optimisation, is very clear: companies wishing to continue to evade their tax obligations will be able to obtain a derogation enabling them to engage in their accounting and fiscal maneuvers to avoid transparency towards citizens”, commented Antonio Gambini, research fellow at CNCD-11.11.11. Oxfam, for its part, calls on the Member States, which will now negotiate on the text with the European Parliament and the Commission, “not to block these reforms, otherwise the tax system will be tailor-made to serve the interests of capital to the detriment of those of citizens”.

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