The European Union will, on Tuesday, unveil a proposal aimed at clamping down on corporate tax avoidance by companies operating in the 28-nation bloc. The new measure, first proposed last year after it came to light that Luxembourg had struck sweetheart tax deals with companies such as McDonald’s and Fiat Chrysler, includes provisions that would force multinationals to disclose how much tax they pay in each EU country — an issue that has assumed special importance following last week’s Panama Papers revelations.
In a joint op-ed published Tuesday by the Irish Times, Valdis Dombrovskis — the EU commissioner for the euro and social dialogue — and Jonathan Hill — the bloc’s commissioner for financial stability — said that the new proposals are aimed at ensuring equity and fair competition among companies operating in the EU.
“If some companies pay less tax, it means others have to pay more. It means that smaller companies, which cannot afford clever tax advice to minimize their bills, are basically paying for some of the multinationals,” Dombrovskis and Hill wrote in the op-ed. “That’s why today, we are proposing legislation that would require all large multinationals operating in Europe to publish information on where they make their profits and where they pay their tax on a country by country basis.”
The proposal would cover approximately 6,500 companies with revenue of over 750 million euros ($856 million). Similar rules already exist for banks, and mining and forestry companies.
In addition to providing a detailed, country-by-country breakdown of profits, taxes and turnover, the long-planned measure — which, once tabled, would require approval from EU governments and the European parliament — also seeks to increase scrutiny of tax havens that are often used by large corporations to hide untaxed revenue.
“While our proposal ... is not of course focused principally on the response to the Panama Papers, there is an important connection between our continuing work on tax transparency and tax havens that we are building into the proposal,” Hill reportedly said in a statement.