A proposed EU directive would require public country-by-country reporting by multinationals on worldwide operations broken down by EU member states, but disclosure of only aggregated data for non-EU operations, according to a leaked copy obtained by the Financial Times and Politico which has been circulating on the internet.
The leaked EU Commission proposal imposes public reporting on all EU and non-EU multinational enterprises with a consolidated turnover over EUR 750 million that have a medium-sized or large subsidiary or branch in the EU. The document does not appear to define what qualifies as a medium or large entity.
Information to be publicly disclosed will include income tax paid and accrued and contextual information, including a brief description of the nature of the activity, the number of employees, net turnover, and profit or loss before tax.
While information on activities inside the EU must be publicly reported on a country-by-country basis, data relating to activities outside the EU may be aggregated into one lump sum, thereby hiding from public view the extent of profit shifting into non-EU tax havens.
The proposal is “wholly inadequate,” wrote tax campaigner, Richard Murphy, in his blog. “This is not, of course, country-by-country reporting. It is EU zone reporting at best,” Murphy said.
International political economist Rasmus Corlin Christensen said the proposed directive “falls far short of that expected by tax justice campaigners, whilst at the same time going further than what many multinational companies have advocated.”
The proposal “aligns with comments made by Bob Stack of the US Treasury, who made it clear that full public disclosure was not a US preference,” said Christensen, who runs a blog on Danish and international tax.
The directive states that an impact assessment of public country-by-country reporting has concluded that the EU should require large multinationals to publicly reveal the tax and profits paid in every country.
The EU Commission had be awaiting the results of the impact assessment before making its proposal on public release of country-by-country data.
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