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EU to force tax disclosure from largest multinationals

Multinationals with turnover of more than €750 million would have to publish profit and tax details on their websites under new European Commission plans, the Financial Times has reported. 22 Mar 2016

According to plans seen by the Financial Times, the Commission would impose the requirement on companies with subsidiaries in Europe as well as those with headquarters in the EU.

The disclosure rules would only apply to activities within Europe, the Financial Times said. Firms would be allowed to aggregate data on all profits made and tax paid outside the EU.

The Commission announced a package of measures in January that is intended to cut down on corporate tax avoidance. This includes an anti–tax avoidance directive which would require all EU member states to introduce restrictions on interest deductibility, controlled foreign company (CFC) rules and an exit charge to prevent companies shifting assets or company residence to low tax jurisdictions.

The package also included changes to the Directive on Administrative Cooperation in Taxation to provide for country-by-country information to be exchanged by Member States. One of the minimum standards that OECD and G20 countries have agreed to introduce as part of the BEPS package is a country-by-country reporting system.

Under country-by-country reporting, the tax administration in the country where a multinational group is resident will collect information about its activities, and its global income and taxes paid. That information will then be automatically exchanged annually with the tax authorities in all countries where the multinational operates. In the proposals published to date, this information will not be made publicly available. The first exchanges are expected to start in 2017-2018.

Catherine Robins, a tax expert at Pinsent Masons, the law firm behind said: "There is a risk that this EU proposal will not suit anyone. Multinationals will be concerned about the increased administrative costs of having to make information publicly available and tax campaigners will be disappointed that the measure will only hit the biggest groups and will not give information about activities in tax havens that are not within the EU."