International experts call out Austria for blocking progress on transparency for multinational corporation practices

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Ministry of Finance excuses crumble, as time runs out for citizens to see where multinationals are paying taxes.

In Vienna today, international organisations criticised the Austrian government for blocking progress on an important EU proposal for transparency about where multinational corporations make their profits and where they pay their taxes.

While Austria claims to be pushing for action on corporate tax dodging during their Presidency of the EU (1), the Ministry of Finance continues to provide flimsy excuses for its failure to progress the proposal for public country by country reporting.

Today, Ministers from EU countries come together for a Competitiveness Council meeting, but the proposal isn’t even on the agenda. Their next meeting in November is one of the last opportunities for Austria to push for an ambitious agreement for transparency for large multinationals.

When secrecy helps large multinationals avoid paying their fair share of taxes, we’re all losing out. While local businesses pay higher taxes than their multinational competitors (2), estimates suggest that the public purse loses $500 billion to tax avoidance every year – money that is desperately needed for public services like schools, hospitals and housing. (3) This form of tax dodging not only affects rich countries like Austria, but also some of the poorest countries in the world.

Shining a light on corporate tax dodging

For many years, tax scandal after tax scandal has exposed schemes allowing multinationals to avoid billions of euros in taxes, while civil society organisations and journalists have been demanding more transparency for corporations like Apple, Google, and Starbucks. The big game changer here is public country by country reporting. This would require corporations to publish, among other things, how much profit they make, where they make it and how much tax they pay in an annual public report.

In 2016, the European Commission tabled a proposal to introduce this. But instead of responding to mounting public pressure for large multinationals to pay fair taxes, many EU governments are resisting progress and watering down plans.

"Transparency changes the balance of power," explains Markus Meinzer, tax expert at the international Tax Justice Network: "That's why the largest corporations have been resisting more of it with all imaginable means for 40 years. This makes it all the more important for governments not to bow to their pressure. Fair competition between national and multinational companies and democracy can only survive with public corporate transparency."

Ministry of Finance offers flimsy excuses

In a response to pressure from NGOs, the Austrian Finance Minister Löger continues to provide flimsy excuses for their lack of action and block public transparency. "None of his arguments are convincing," says Martina Neuwirth of the VIDC: "This is a positive step for competitition, citizens and SMEs".

Public reporting requirements have existed for banks and commodity companies in the EU since 2014 - without creating any competitive disadvantages (4). They would even help to reduce distortions of competition between national SMEs and multinational corporations. According to the European Commission, the former pay 30 per cent more cororate income taxes. The EU Commission's proposal would cover the biggest multinational companies - less than 15 percent of the world's largest corporations, as they operate in the EU.

David Walch of Attac Austria adds: "While big comanies enjoy secrecy, the past has shown that we cannot rely on governments to ensure fair taxation of corporations. It was not the tax administrations, but the independent media and civil society that uncovered tax scandals such as LuxLeaks or Paradise Papers, thus creating pressure for political progress." (1)

Time is running out, as Austria cosies up to EU tax havens

By keeping public country by country reporting off the table, Austria's presidency of the EU is preventing citizens getting a clear picture of how much tax large multinational companies are paying and where they're paying it.

Olivia Lally of Brussels-based NGO the European Network on Debt and Development (Eurodad) explained: "By joining tax havens and blockers in the EU like Luxembourg, Ireland, Malta and Cyprus, Austria is undermining this important effort to tackle tax avoidance. Countries including the Netherlands, Romania, Poland, Denmark, Belgium and Spain support this important proposal, but time is quickly running out, with the European elections fast approaching."

Austria must drive the Council of the European Union to adopt a final position in 2018, supporting full public country by country reporting without loopholes and exceptions, if agreement is to be reached before the elections. Fair competition and democracy can only survive with more corporate transparency.


ENDS

To organise an interview in English with Olivia Lally or for further information from Eurodad (the European Network on Debt and Development) please contact Julia Ravenscroft on [email protected] or +32 486356814.

To organise an interview in German with Martina Neuwirth of VIDC, David Walch of Attac Austria and Markus Mienzer of the Tax Justice Network, please contact David Walch +436505440010 or [email protected].

Notes to editors

(1) See government programme p. 131: "More (tax) transparency for multinational companies based on EU requirements.“ https://www.oevp.at/download/Regierungsprogramm.pdf

(2) The European Commission also highlighted that in 2014, Apple’s effective corporate tax rate in Ireland had been as low as 0.005%, compared to the 20.9% effective rate they say domestic companies pay in Europe. See Impact Assessment, Accompanying the document Proposal for a Council Directive laying down rules relating to the corporate taxation of a significant digital presence and Proposal for a Council Directive on the common system of a digital services tax on revenues resulting from the provision of certain digital services {COM(2018) 147 final} - {COM(2018) 148 final} - {SWD(2018) 82 final}. Available from https://ec.europa.eu/taxation_customs/sites/taxation/files/fair_taxation_digital_economy_ia_21032018.pdf

(3) See Measurement of Illicit Financial Flows by Alex Cobham and Petr Janský, UNODC-UNCTAD https://www.unodc.org/documents/data-and-analysis/statistics/IFF/Background_paper_B_Measurement_of_Illicit_Financial_Flows_UNCTAD_web.pdf

(4)Since 2014, European banks have been obliged by an EU directive to publish their profit and tax data as a result of the Capital Rights Directive IV.

Further information

Public country by country reporting state of play in Europe

Q&A on Impacts on Business and Jobs in Europe