Missed Opportunity: EU Parliament rubber stamps Directive that promises tax transparency, but fails to deliver
Today a passive adoption marks the end of a painful five years which began with a draft directive launched by the European Commission in April 2016 and ended with a watered-down piece of legislation devoid of anything meaningful. The final Directive fundamentally fails to respond to growing public demands for transparency around big corporations’ tax affairs and an end to tax havens. While one group tabled an amendment that would have brought strong improvements to the directive, it was not adopted.
Tove Maria Ryding, Tax Coordinator at the European Network on Debt and Development (Eurodad), said:
“This Directive is nothing to celebrate. The general public has been demanding for some time to know where multinational corporations do their business and how much they pay in taxes in each country, so that we can fight corporate tax avoidance and prevent huge sums from being hidden away in tax havens. When we look into the detail of this Directive, we see that corporations will only have to report their activities in a very limited number of countries. In fact, if these rules were in force today, corporations would be able to avoid reporting on their activities in over 75 per cent of countries worldwide. If we want to fight corporate tax avoidance, we need a full global overview to see if corporations are hiding their profits in tax havens. We will not get that with this directive.
“We were happy to see that one group in the European Parliament tabled an amendment that would significantly improve the directive. We really regret that this amendment was not adopted due to lack of support from other groups.
“As governments at COP26 continue to struggle to find enough money to tackle the impacts of the global environmental crisis, it is nothing short of shameful that the EU has failed yet again to introduce transparency that could help prevent large-scale corporate tax avoidance. Progress on this could have boosted public coffers with much needed extra tax revenue – not just in EU countries, but also in the world’s poorest countries.
“The EU decision-makers have failed to do the job when it comes to public country by country reporting, but that does not change the fact that we urgently need it. We have seen in other cases that failed EU directives can be reopened shortly after adoption, and that is what we are calling for in this case too. And until then, we call on the individual EU Member States to consider going further and introducing real public country by country reporting at the national level. It is only a matter of time before more scandals break and we get another reminder of the fact that in the dark corners of our economies, large-scale corporate tax dodging is still very widespread.”
Media contact: Julia Ravenscroft, Communications Manager, Eurodad: +44 7958 184 695/ [email protected]
Notes to editors
- Amendments to the directive were tabled by Manon Aubry on behalf of the Left Group in the European Parliament. While one amendment, which can be found here, would have introduced fundamental improvements to the directive, it was not adopted.
- In June 2021, negotiators from the European Parliament, Council and Commission reached agreement on a compromise text in a third round of inter-institutional negotiations on a proposed amendment to the Directive of the European Parliament and of the Council amending Directive 2013/34/EU as regards disclosure of income tax information by certain undertakings and branches. This agreement has now gone through formal approval by the Council and will be passively adopted (without a vote) in the European Parliament today.
- Before the negotiations were finalised, 80 civil society organisations wrote to the negotiating team from the European Parliament, urging them not to support an agreement on public country by country reporting unless it obliges large multinationals to report on a country by country basis for all countries of operation. As explained in the letter, without this, reporting obligations cannot be considered country by country reporting. The letter can be found here.
- Investors representing US$5.6 trillion in assets also wrote to the co-rapporteurs from the European Parliament and the Portuguese Presidency of the Council of EU Member States to call on them to support full public county by country reporting. The letter called for real transparency that would require multinational corporations to report on activities in every country they do business in and highlighted that a Directive without reporting on a country by country basis (global disaggregation) could be counter-productive and would not be valuable to investors. The letter can be found here.
- By June this year, more than 130,000 people had signed a petition urging EU decision makers to introduce ambitious and public country by country reporting.
- Media outlet Contexte published a story in April detailing how corporate lobbyists allegedly drafted France’s official position on public country by country reporting. The story can be found here and Eurodad’s reaction here.