EU deal on country-by-country reporting won't stop worst corporate tax practices

Negotiations between EU institutions over long-awaited legislation on country-by-country tax reporting by multinational companies were concluded last night with a disappointing agreement.

Legislation to prevent tax avoidance schemes and aggressive tax planning, of the kind to which banks are already subject to, are needed to meet important social and ecological needs at a time of rising inequality.

Under the agreement, multinational companies will have to report  disaggregated figures on their activities only in the EU and in countries listed within the EU grey and black list.

However, although about 80% of the tax being avoided by large companies in the EU are due to European tax havens, the measures could act an incentive to delocalise activities or shift profits to Switzerland or Singapore, the British Virgin Islands or Cayman Islands for example, which are not in the lists.

Moreover, multinational companies will be able to delay reporting for 5 years, for business secrecy reasons and the threshold for mandatory reporting remains very high at €750million turnover for two consecutive years. A review clause is mentioned after 4 years, but we do not know its scope and whether full global disaggregation will be at stake.

All in all, this is a disappointing agreement that will leave the worst business practices untouched and disappoint citizens who were promised real action in the wake of major tax avoidance scandals.  What’s more, if the US administration manages to pass its bill on real multinational tax reporting, Europe will be seen as the stooges of unfair and bad business practices.

However, with the file under discussion since 2016, re-starting the process from scratch would be a mistake. Trade unions will, along with civil society organisations and ethical investors, continue the struggle for tax and social justice.