Following the mass data leak known as the Panama Papers, the EU is ready to go to war with multinationals to force them to be completely transparent with how much tax they pay and where.
Aside from being the single biggest data leak in history, with more than 2TB of files on the actions of those availing of tax-free havens, the Panama Papers has now pushed the European Commission (EC) to act in trying to clamp down on major multinationals it believes are not paying their fair share of tax.
According to the EC’s new proposal on tax transparency, between €50bn and €70bn a year is considered lost tax revenue based on the earnings of some of the largest multinationals based in the Union.
6,000 multinationals facing greater scrutiny
Under its proposal, major multinationals – regardless of whether they are European or not – operating in the EU with annual global revenues exceeding €750m will be required to publish key information on where they make their profits and, more specifically, where they pay their tax in the EU on a country-by-country basis.
Following on from this, companies will be required to publish an aggregate figure for total taxes paid outside the EU.
This model follows the guidelines set out by world leaders at last year’s G20 summit and, if it is to be enforced within the EU, could affect as many as 6,000 multinationals.
The EU will also be creating a ‘blacklist’ of tax havens that will forbid multinationals from engaging in any tax dealings in these locations.
‘The Panama Papers have not changed our agenda’
In a speech delivered yesterday (12 April) by EU Commissioner Jonathan Hill, it was emphasised that the EU’s agenda has not changed as a result of the Panama Papers leak, but it has forced them to act.
“The Panama Papers have not changed our agenda, but I think that they have strengthened our determination to make sure that taxes are paid where profits are generated,” Hill said.
“So the proposal that we are unveiling today builds on the work that has been taking place under the aegis of the OECD to require the sharing of information related to corporate income tax between tax authorities.”
Hill, also commenting on the proposed amendment, said that this ruling will make multinationals more accountable as, under “complicated tax arrangements”, multinationals can pay nearly a third less tax than companies that only operate in one country.
European Parliament building image via Alexandra Lande/Shutterstock