After years of wrangling, Europe has agreed on an effective anti-dumping method. By mid-2023, multinational corporations must report to each country on profits made and taxes paid.
The European Parliament has been calling for years for more tax transparency, not only in tax havens but also in Europe. In June, representatives of member states and the European hemisphere agreed to submit mandatory state-by-state reporting on business volumes, workforce, profits and taxes across the EU.
Member states ratified the agreement on Tuesday. This paves the way for formal approval by the full European Parliament in November. Voting is more than formal. The new measures will take effect a year and a half later, somewhere in the spring of 2023.
In concrete terms, large multinational corporations must indicate where they make their profits and where they pay taxes in Europe. The reporting obligation applies to companies operating in more than one Member State with sales over 750 million euros. Non-EU multinationals must demonstrate the same transparency. Such transparency is beneficial to the investors, taxpayers and clients of the multinational corporations involved, says German Green MEP Sven Giegold, who has been leading the tax transparency process for nearly twenty years.
If large corporations had to disclose their earnings and taxes by country, the financial dumping would become more evident every year.
Eight member states attempted to undermine the compromise with the European Parliament in the run-up to the vote. Sweden and Cyprus voted against. The Czech Republic, Ireland, Luxembourg and Malta abstained. Some Member States have indicated that they may take the case to the European Court of Justice against country-by-country reporting. But Luxembourg’s finance minister, Pierre Gramegna, has already given up on that “lost battle”.
United States move
According to Giegold, “Days are numbered for tax havens that attract the revenues of their EU partners. If large corporations are forced to disclose their profits and taxes to every country, financial dumping will become more evident every year. Recent studies by French economist Gabriel Zucman show, among Others, argue that 80 per cent of lost tax revenue for large EU firms has been transferred to Ireland, Luxembourg and the Netherlands.
The United States is working on legislation requiring listed companies to report all relevant data, including the financials of every country in the world. So US law would go beyond the European reporting obligation. Provides insight into where taxes are paid in the world.
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