As published on accountancydaily.co, Friday October 25, 2019.
The resolution, adopted by 572 votes in favour, 42 against and 21 abstentions, seeks support for legislation requiring public country-by-country reporting (CBCR) of taxes paid by multinationals. It will be followed by talks between member states and the European parliament agreeing on a final text of the rules.
EU MPs already backed the proposed legislation in 2017, but EU ministers have failed to adopt a position and, as a result, no law has been adopted as yet.
The new proposal aims to crack down on corporate tax avoidance, which is estimated to cost EU countries €50bn-€70bn (£ a year in lost tax revenues, according to the European Commission.
Currently, multinationals are only required to indicate an aggregate of the taxes they have paid, without detailing what was paid to which tax jurisdiction.
The proposed legislation is intended to make taxes more transparent by providing the public with a picture of the taxes paid by multinationals, and where those taxes are paid. It would take the form of an amendment to the Accounting Directive 2013/34 providing for public CBCR.
The proposal aims at adding geographical information linking corporate taxes and actual profits, in line with the principle that enterprises should pay tax where they actually make profits. Companies would be required to provide information in seven specific areas.
These cover a brief description of activities; the number of employees; net turnover (including related party turnover); profit or loss before tax; tax accrued (excluding deferred tax and uncertain tax positions) in the year; tax paid in the year; and the amount of accumulated earning. The information would be presented on a geographical basis, for each member state jurisdiction, and would be published as an annual report which each company would put up on its website for a period of five years.