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#Taxes: EU to force large companies to disclose more tax details

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Following the leak of the Panama Papers, the European Union has revealed its latest plans to force large companies to disclose more about their tax affairs.

They will have to declare publicly how much tax they pay in each EU country as well as any activities carried out in specific tax havens, reported BBC News.

Multinational firms earning more than €750m in sales will be affected by the new "country-by-reporting" rules.

Besides the Panama Papers revelations, these rules also follow an increasing pressure on multinational companies such as Starbucks and Google to pay more tax in the countries where they operate.

The new proposals will cover more than 6,000 of the worlds biggest companies. A third of these companies are headquartered within the EU and represent around 90% of the turnover of all multinationals.

The European Parliament estimated that EU states lose at least €50-70bn (£40-56bn; $57-80bn) each year to corporate tax avoidance.

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Under the recent proposals, multinationals would have to disclose for each country within the EU that they operated in:

  • The nature of the activities, and the number of employees
  • The total net turnover, including turnover made with third parties and between companies within a group
  • The profit made before tax
  • The amount of income tax due, and the tax paid.

Multinationals will also have to report how much tax they paid in tax havens, or what the EU calls "jurisdictions that do not abide by tax good governance standards".

Prime Minister David Cameron's official spokeswoman said: "We welcome the proposals coming out from the European Commission today, which will further enhance our ability to make sure that companies are paying taxes owed.

Transparency

The rules will not apply to companies' other activities outside the EU.

But the European Network on Debt and Development, an association of trade unions and non-governmental organizations, says companies should be forced to adopt country-by-country reporting for inside and outside the EU.

BBC News reported that in a letter to the European Commission President Jean-Claude Juncker, the association said multinationals should also publish more information: "The proposal... would effectively allow multinationals to continue shifting their profits out of the EU while still keeping citizens in the dark.

"It would also make the measure useless for developing countries as they would not be able to get any country-specific information."

An EU source said that getting the rules applied outside the EU would be politically impossible. She said: "We'd never get [that] passed. We need it to have political backing."

More information

Lord Hill, the EU's financial services commissioner, said: "The main risks of having disaggregated information outside the EU is that businesses in other jurisdictions could get important business data on European businesses that they could use to their competitive advantage, and third-country tax jurisdictions might see information that could lead them to double-tax firms.

"Our economies and societies depend on a tax system that's fair, a principle that applies both to individuals and to business.

"Yet today, by using complicated tax arrangements, some multinationals can pay nearly a third less tax than companies that only operate in one country.

"The Panama Papers have not changed our agenda, but I think that they have strengthened our determination to make sure that taxes are paid where profits are generated."

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