The European Commission (EC) has published a proposal to amend the EU Accounting Directive to introduce public country-by-country reporting (CBCR) obligations by multinationals, but civil society groups and tax experts doubted it would have any significant outcome.
The proposal will require businesses with worldwide consolidated net turnover of more than €750m ($855m) to produce a public report containing information on the companies’ tax affairs.
The proposal suggest that the information be presented separately for each EU member state in which the business operates, individual countries outside the EU considered as ‘tax havens’, and other non-EU countries.
For each of these groups companies will have to report:
- The nature of the enterprise’s activities in that country
- The number of persons employed by the enterprise in that country
- The net turnover made (including with related parties) in that country
- The profit made before tax in that country
- The amount of income tax due in the country as a reason of the profit made in the current year
- The actual payments made to the country’s treasury during that year, and the amount of accumulated earnings
However professionals and tax experts are sceptical of the proposals arguing that it created an additional administrative burden for companies and that CBCR would be ineffective if it is not undertaken on a global basis.
Civil society groups also criticised the proposal saying that the suggested threshold was too high and left many companies off the hook. A particular point of the proposal which received a lot of criticism was the suggestion to establish a list of countries which do not observe international standards for good governance in the area of taxation.
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By GlobalDataMany argued that such a list would be impractical as it would likely be selective and highly politicized.
Read the full report: EU Commission tax proposal falls short of civil society’s expectation and raises scepticism amongst tax experts