In what might reopen the floodgates for more criticism of big corporations, the European Commission is reportedly working on legislation which would force the world’s largest multinationals to reveal details of their tax bills and earnings.
We’ve already seen the response to George Osborne triumphantly revealing HMRC was getting £130m back in taxes from Google in exchange for the tech giant escaping the um, Google tax. It hasn’t been pretty. But anger over multinationals’ approach to tax has been building since at least 2014, when documents were unearthed revealing how hundreds of global firms had secured sweetheart deals with Luxembourg.
Perhaps riding this wave of public bitterness, the EU plans to make such firms lay out their tax arrangements for all to see. Initial conclusions from its ongoing impact assessment (an EU impact assessment doesn't sound scary, but given the fines it's capable of dishing out, it actually could be) found in favour of requesting large corporations revealing their profits and the tax they pay in every country in which they operate within the EU. Which could really make for some interesting reading (and a deluge of inflammatory headlines). The Americans (President Trump?) won't be happy either, given that the multinationals in question are almost always US based. Popcorn at the ready.
The revenue threshold for these companies hasn’t yet been established, but sources told the Guardian the rules would only apply to 'large', global multinationals. The impact assessment work was said to be in its final stages and the Guardian’s source said it would be ‘likely there will be some form of legislative initiative announced for the beginning of April... for public country-by-country reporting’.
That’s the key point – public country-by-country reporting would make it much more difficult for firms to secure deals with governments on how and where they declare their profits, without provoking public ire. And it’s apparently that impact assessment which has turned opinion around within the Commission – only last month it proposed that corporations just report to national tax authorities in Europe without making the information public, which caused predictable criticism.
If public reporting is restricted just to large firms (for instance those with more than €750m in annual turnover) then a large swathe of multinationals could go unscathed and continue to make use of existing loopholes. Until the terms are defined and a majority of governments agree with them, it’s a little early to champion the EU for cracking down on this perennial problem.