EU finance ministers split on public release of multinational corporation tax data

by Julie Martin

Dutch finance minister and president of the Eurogroup, Jeroen Dijsselbloem, expressed support for a proposal that would mandate public release of country-by-country tax data on multinationals, while finance ministers from Malta, Belgium, and Austria signaled their opposition to the measure, speaking separately to the press during an informal gathering of the Economic and Financial Affairs Council in Amsterdam held April 22–23.

At issue is a controversial European Commission proposal for a directive, released earlier this month, that would require large multinationals operating in Europe to publicly report on their websites tax information, on a country-by-country basis, about a group’s operations in the EU and in non-EU countries considered to be tax havens.

The Commission proposal would amend the Accounting Directive (2013/34/EU) and, as such, would be subject to only qualified majority voting among the EU states, not unanimity, as is required for legislation on harmonization of tax rules.

According to Dijsselbloem, EU finance ministers have not yet discussed the Commission’s proposal in detail, but intend to do so next month.

Dijsselbloem said that while the Dutch are still “very much in favor” of public release of the country-by-country data,”there are some that are worried that it will damage the [competitiveness] of Europe.” He said he doubted the issue would be resolved by the ministers during the Dutch presidency.

Malta, Belgium, Austria

Malta’s Finance Minister, Edward Scicluna, was among those expressing opposition to the Commission proposal. “I think that as a first step we will go for country-by-country reporting. And then as a second step, we will just go public if after discussions it is found that it is in the benefit,” Scicluna said.

Pressed to explain why he did not support public release of the data at the outset, Scicluna responded that his overriding interest is making sure that taxes due are paid.

Scicluna said companies may have legitimate reasons to want to keep data on their taxes out of the public eye. “We should not overreact because there could be reasons . . . . [T]hose who are on the stock exchange, for example, have an obligation to shareholders. Other companies who pay their tax and so on might have commercial reasons,” he said.

Similarly, when asked about public release of county-by-country reports, Belgian Minister for Finance Johan Van Overtveldt said that “we have to be careful about privacy issues and other issues related to that.”

Austria’s finance minister, Hans Jörg Schelling, also said he did not support public release of the data. Taxpayer confidentiality is an important principle in Austria, said Schelling, who maintained that exchange of data between tax administrations was sufficient. Schelling added, though, that he was only expressing his own view, and that if a majority on the Council supported public release, he would reevaluate his position.

German perspective

Germany’s finance minister, Wolfgang Schäuble, has previously expressed strong opposition to public release of country-by-country data, whereas French finance minister, Michel Sapin, has expressed support, as has UK Chancellor George Osborne and Greece’s minister of finance Euclid Tsakalotos.

Ninja-Antonia Reggelin, an international tax policy professional based in Berlin, explained that there are several reasons for Germany’s opposition to public country-by-country reporting.

First, the measure would disproportionately affect German companies as about 1200 of the 2000 EU companies large enough to meet the country-by-country filing requirement threshold are German, Reggelin said.

Moreover, Germany is concerned that if the EU makes the data public, non-EU countries, such as the BRICS (Brazil, Russia, India, China, South Africa ) and the US may not have an incentive to adhere to agreements to exchange country-by-country reports among tax officials.

“Germany’s strategy was to force them by saying ‘we will only give you our CbCR if you give us yours.’ If the data would be publicly available, Germany would lose that advantage,” Reggelin observed.

Reggelin also pointed out that, while it is very clear that the German finance ministry is against public release of country-by-country tax information, the justice ministry, which is responsible for the decision, has not yet commented. The justice ministry has invited feedback on the EU proposal by May 13, she said.

Reggelin said that Germany’s finance ministry may mount a legal challenge, asking the EU Commission legal service to examine if the EU has overstepped its competences in tax matters and sidestepped unanimity by amending the accounting directive.

— Julie Martin is a US tax attorney and a member of MNE Tax’s editorial staff.

 

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