On July 4, 2017, the European Parliament (EP), in a plenary session, adopted amendments on the proposal for a directive to amend EU Directive 2013/34 regarding the disclosure of income tax information by certain undertakings and branches. See the accompanying press release. The EP approved the draft report on the proposal by 534 votes to 98 votes, with 62 abstentions, voting to send the report back to the Committees.
Under the proposed measures, the income tax information of multinational firms with worldwide turnover of €750 million or more would be published in a common template in each tax jurisdiction in which the firm or its subsidiary was operating. See BEPS Action 13. This data would be available for free and made publicly accessible on the firm’s website.
The company would also be responsible for filing a report in a public registry managed by the European Commission. The information would include the following:
- Name of the firm and list of all its subsidiaries, including a brief description of the nature of their activities and geographical location.
- Number of employees on a full-time equivalent basis.
- Amount of net turnover.
- Stated capital.
- Amount of profit or loss before income tax.
- Amount of income tax paid during the relevant financial year by the firm and its branches resident for tax purposes in the relevant tax jurisdiction.
- Amount of accumulated earnings.
- Whether undertakings, subsidiaries or branches benefit from a preferential tax treatment.
The EP also supported measures to protect commercially-sensitive information by allowing member states to grant exemptions from the disclosure requirement. These exemptions would be renewed annually and would only be applicable in the jurisdiction of the member state granting the exemption. Once a member state grants an exemption, it must inform the EU Commission confidentially about the omitted information, together with a detailed explanation for the exemption. Every year, the Commission will publish on its website a list of firms which were granted exemptions.
The EP also supported amendments which would set limits on exemptions. One of the amendments requires companies that lose their eligibility for an exemption to immediately make the omitted data publicly available.
According to Reuters, EU countries lose between €50 and 70 billion in revenues each year due to tax avoidance. “Tax-dodging schemes often hinge on the transfer of taxable profits from the higher-tax states where they are made to countries with lower taxation or none at all. Tax-saving schemes used by Apple, Amazon, Google, Starbucks and other companies have raised public pressure for EU-wide rules to close these loopholes.”