26/02/21

IRELAND: EU to force multinationals to reveal tax filings as jurisdiction loses debate.

As published on irishtimes.com, Thursday 25 February, 2021.

The EU is to move ahead with a new law to force multinationals to reveal their tax payments and activities for each member state, as backing for the measure outnumbered the opposition of a group of countries led by the Republic.

The country-by-country reporting proposal for companies with revenue of more than €750 million had been stalled since 2016, with a number of member states opposing it, including the Republic, Luxembourg, Hungary and Sweden.

But Portugal made progress on the proposal a priority for its six-month rotating presidency of the EU and called a public discussion of the issue on Thursday, which revealed a blocking majority no longer exists.

“A broad majority of member states” are now in favour of the law, and it will now move forward to be finalised with the European Parliament, Portuguese economy minister Pedro Siza Vieira announced.

The Irish Government spoke out against the measure in the debate, arguing that the rule and the route chosen to approve it were legally unsound.

“We consider that this measure should have the benefit of tax expertise to ensure it is consistent with existing requirements, and importantly with the international co-operation and exchange-of-information arrangements which are based on confidentiality,” Minister of State for company regulation Robert Troy told the debate.

“As with all laws, it is essential that the proposed directive is developed with the appropriate legal basis to ensure it is legally robust and secure against any future challenges so that shared objectives against transparency and good governance are comprehensively realised.”

Ireland opposes the measure along with several other member states on the basis that it is a tax measure, should be based on different legislation, and should be dealt with by finance ministers – a route that would require unanimous support rather than a qualified majority, granting Ireland a veto.

The choice to pass the measure through the competitiveness council – which is comprised of EU trade and enterprise ministers rather than finance ministers – means the law requires only a qualified majority to pass and the discussion on Thursday revealed that this has been reached.

Enough member states spoke in favour of it on Thursday to allow it to go through, with Denmark describing it as an “important” step against “aggressive tax planning” by multinationals, and several countries praising it as a fair compromise.

Supporters of the law insist that because it concerns the harmonisation of reporting by companies in the EU, and does not affect tax rates levied by member states, its legal basis is sound.

Ireland’s commissioner Mairéad McGuinness, who championed the proposal in the discussion on behalf of the European Commission as head of financial services, said the executive viewed the measure as robust and noted that the European Parliament was of the same view.

“The proposal in no way seeks to modify the fiscal rules applicable to companies nor to enforce fiscal rules at EU or national level,” Ms McGuinness said. “I welcome the general view for the need for transparency on this matter.”

But Mr Troy’s warning of potential “future challenges” to the law raises the prospect of objections to the measure in the European Court of Justice down the line.

Christian Aid, which called on the State to drop its opposition to the measure along with a coalition of charities ahead of the debate, welcomed the development.

“Today is a landmark moment in the fight against tax dodging by multinational companies,” head of policy and advocacy Sorley McCaughey said. “Ireland’s opposition ultimately did not make any difference as the majority of the EU are in favour of transparency.”

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