In June 2015, the Commission launched a broad assessment into the impact of potential measures to introduce public reporting requirements on multinationals operating in the EU. This involved an in-depth analysis of different policy options, as well as targeted consultations, in order to weigh up the objectives, benefits, risks and safeguards of further transparency on corporate income tax. Present proposal reflects the outcome of this work.

See: COM (2015) 610 final, 27 October 2015 and COM (2014) 910 final, 16 December 2014.

The proposal is closely linked to the revision of the Administrative Cooperation Directive, politically agreed by EU states in March 2016, which requires certain multinational enterprises to submit a CBCR to EU tax authorities. This revision implements the OECD's BEPS Action Plan endorsed by G-20 leaders in Antalya in November 2015.

Present proposal (12.04.2016) will amend the Accounting Directive (Directive 2013/34/EU) to ensure that large groups publish annually a report disclosing the profit and the tax accrued and paid in each EU state on a country-by-country basis. This information will remain available for five years.

Contextual information (turnover, number of employees and nature of activities) will enable an informed analysis and will have to be disclosed for every EU country in which a company is active, as well as for those tax jurisdictions that do not abide by tax good governance standards (so-called tax havens). Aggregate figures will also have to be provided for operations in other tax jurisdictions in the rest of the world. The proposal has been carefully calibrated to ensure that no confidential business information would be published. Commission initiatives against tax avoidance see in IP/16/159.  

The proposal for a Directive is now submitted to the European Parliament, the Council of the EU and the Commission; the latter hopes that the proposal will be swiftly adopted in the co-decision process. Once adopted, the new Directive would have to be transposed into national legislation by all EU states, within one year after the entry in force.

Introducing information sharing between tax authorities

Present Commission’s proposal builds on the EU work to tackle corporate tax avoidance; it is estimated to cost the member states about € 50-70 billion a year in lost tax revenues. 

The proposal requires multinationals (MNCs) operating in the EU with global revenues exceeding € 750 million a year to publish key information on where they make their profits and where they pay their tax in the EU on a country-by-country basis. The same rules would apply to non-European multinationals doing business in Europe. In addition, companies would have to publish an aggregate figure for total taxes paid outside the EU.

This proposal is a simple, proportionate way to increase large multinationals' accountability on tax matters without damaging their competitiveness. It will apply to thousands of large firms operating in the EU, without affecting small and medium-sized companies.

The proposal also provides for stronger transparency requirements for companies' activities in countries which do not observe international standards for good governance in the area of taxation. Commission’s proposal is build on the External Tax Strategy with the aim of establishing the first common EU list of such tax jurisdictions as rapidly as possible.

Commission’s comments

Vice-President Valdis Dombrovskis, responsible for the Euro and Social Dialogue underlined that combating tax avoidance had been a key priority of the new Commission, as close cooperation between tax authorities must go hand in hand with public transparency.

He said that Commission intends to make information on income taxes paid by multinational groups readily available to the public, without imposing new burdens for SMEs and with due respect for business’ confidentiality. Hence, by adopting new proposal, the EU is demonstrating its leadership in combating tax avoidance.

Commissioner Jonathan Hill, responsible for the EU’s financial stability said that the member states’ economies and wellbeing depend on a fair tax system, which would apply to both individuals and business.

He added that by using complicated tax arrangements (often called “tax planning”), some multinationals can pay nearly a third less tax than companies that operate only in one country. Thus, the new proposal to increase transparency will help make companies more accountable; besides, it will promote fairer competition between companies regardless of their size.

In his remarks on tax transparency rules for multinationals (Strasbourg, 12 April 2016), he acknowledged strong College support for the proposal requiring all large MNCs operating in Europe to publish information on the tax they pay, country-by-country.  

The EU-28 already reached an agreement on the automatic exchange of tax rulings among the states and reached a deal (in March 2016) to allow the automatic exchange of tax information received from large multinationals between tax administrations.

Mandatory public country-by-country reporting will enable citizens to scrutinise MNCs tax behaviour, which in turn, would encourage companies to pay tax where they make their profit.

This reporting will also support efforts to gain a better insight into EU states' tax systems and help identify existing loopholes and mismatches, thereby shedding more light on the causes and consequences of corporate tax avoidance.

Additional information is on the following websites:

= MEMO on public tax transparency rules for multinationals; = Communication on public tax transparency rules for multinationals; = Impact assessment for public tax transparency rules for multinationals; = Information on the Anti-Tax Avoidance Package; = MEMO on the Anti-Tax Avoidance Package; = Information on the political agreement on CBCR between tax authorities;

http://ec.europa.eu/finance/consultations/2015/further-corporate-tax-transparency/index_en.htm

= http://europa.eu/rapid/press-release_IP-16-1349_en.htm

EU tax transparency principles

The Panama papers have not changed EU agenda; on the contrary, “the case” has strengthened determination to make sure that taxes are paid where profits are generated.  So the present proposal builds on the work taken by OECD to require the sharing of information related to corporate income tax between tax authorities. Commission’s proposal goes a step further and will require the biggest multi-nationals to make key information public.

It can help the public see whether companies are acting in the best long term interests of their shareholders from a reputational point of view.

In developing this proposal for greater tax transparency, the Commission was guided by a number of principles:

- to be consistent with international work by the OECD and endorsed by the G-20;

- to stick to major reforms already taken by Commissioner Pierre Moscovici to increase transparency and fight tax avoidance;

- to bring forward measures that will affect all biggest MNCs operating in Europe, not just European businesses; and

- to be proportionate in two main respects: first, not to undermine the position of European businesses against their global competitors; and second, not to burden European SMEs, which are typically operate only in one country.

Indeed, the Commission’s intention has been to protect the SMEs’ competitive position: smaller companies, which are not able to shift their profits, or cannot afford clever tax advice to minimise their bills, should not lose their competitive advantage to big multi-nationals.

Businesses should be concentrated on their customers, on service, on product innovation, on true competition - rather than on “creativity competition” among tax advisers.

Proposal’s essence

It would require larger multinationals, i.e. those with annual global revenues above €750 million (which is in line with the OECD approach) to publish information publically in seven key areas. This definition will cover about 6.500 businesses and 90% of multinational revenues. On a country-by-country basis, they would need to publish: = the nature of their activities; = how many staff they have; = their net turnover; = their profit before tax; = the amount of tax due based on yearly profits; = the amount of tax they actually paid in that same year; and = their accumulated earnings.

This information is already collated and provided to national tax administrations. MNCs will also be required to report (as well as the country-by-country reporting within the EU) on the total tax they pay outside the EU.

And, if they pay taxes outside the EU in countries or jurisdictions that don't abide by international good governance standards on tax, MNCs would have to publish the same detailed information as for a European country. So if large multinationals active in Europe are paying tax in somewhere like Panama (to take an example) they’d need to make that public.

Taken together, this information will give a clear idea of whether a large MNC is paying tax where it makes its profits. It would be made available for five years on the company’s website; anyone interested could see where MNCs pay taxes (as well as whether there is a level playing field for smaller businesses).

To make sure European companies are not disadvantaged, these rules would apply to the subsidiaries of non-European multinationals doing business in Europe, as well as large European multinationals.

European banks already have a specific transparency regime in the Capital Requirements Directive so that they will not be affected by the proposal. The only change will be that large banks established outside the EU, but doing business inside it, would now be required to publish a country-by-country report.

In drawing up this proposal, the Commission consulted widely all interested parties and taking into consideration OECD's work; that makes the proposal simple and proportionate while increasing accountability. The next step will be to work with the EU states and the European Parliament to make quick progress and having a more informed debate about where companies pay tax, in order to promote fairer competition between companies regardless of their size. Reference: http://europa.eu/rapid/press-release_SPEECH-16-1365_en.htm?locale=en

Introducing public country-by-country reporting for multinational enterprises

In Commission’s Questions & Answers (Strasbourg, 12 April 2016) more detailed information was published concerning the new proposal. 

= Since the beginning of its mandate at the end of 2014, the Juncker Commission has pursued an ambitious agenda to ensure fair taxation, meaning that companies should pay their fair amount of taxes in the country where they generate their profits. Fighting against tax avoidance and aggressive tax planning has been a political priority for the Commission too.

An environment of complex tax rules and fiscal secrecy has allowed some multinational enterprises to exploit non-transparent loopholes and mismatches in tax systems within the EU. According to the European Parliament, it is estimated that countries in the EU lose € 50-70 billion each year to corporate tax avoidance. Some recent investigations have shed light on the low taxes paid by certain multinationals and triggered public concern regarding the efficiency and fairness of the tax system.

See more: COM (2015) 610 final of 27 October 2015 and COM (2014) 910 final of 16 December 2014. And Bringing transparency, coordination and convergence to corporate tax policies in the European Union; Assessment of the magnitude of aggressive corporate tax planning.  

Combating corporate tax avoidance has been in the European and global agenda in the past years. The EU is already leading the way internationally when it comes to tax transparency by having adopted binding measures to prevent the concealment of offshore funds. The recent press investigations, known as the Panama Papers, confirm once again the importance of this agenda, and the Commission will continue to pursue it with determination and with particular focus on tax transparency. The EU states agreed to the Commission’s proposal for transparency on tax rulings and other important corporate tax reforms. See: IP/15/5780.

In November 2015, G-20 leaders in Antalya endorsed the OECD Base Erosion and Profit Shifting (BEPS) Action Plan, which introduces, among other actions, country-by-country reporting to be submitted by multinational firms to a relevant tax authority, information which is then exchanged between tax authorities. In January 2016, the Commission proposed to introduce this provision in the EU and make it legally binding, through an amendment to the Administrative Cooperation Directive in follow-up to the Tax Avoidance Package (ATAP).See:   IP/16/159; in March 2016, the ECOFIN Council reached a political agreement on this proposal.

The Commission will pursue its ambitious agenda for fair and effective taxation, with a number of other important proposals, including the re-launch of the common consolidated corporate tax base (CCCTB).The new proposal will strengthen this work with additional transparency measures.

With the new proposal, the Commission is responding to the intense public demand to combine openness on company accounts and the level of taxes actually paid with the need to safeguard the competitiveness of EU businesses. Particular attention is also paid to tax information relating to countries that do not respect good governance standards. Public transparency on tax is also an important part of companies’ corporate social responsibility.

= Commission’s proposal: effects. The proposal will pay particular attention to tax information relating to countries that do not respect good governance standards. The European Commission is proposing to require large MNCs to disclose publicly the income tax they pay within the EU, country by country. In addition, they would be asked to disclose how much tax they pay on the business they conduct outside the European Union. For those tax jurisdictions that do not abide by tax good governance standards (so-called tax havens), this information will need to be disclosed on a disaggregated basis.

Any MNC (both European and/or global), which is currently active in the EU’s single market with a permanent presence in the Union and that has a yearly turnover in excess of € 750 million would have to comply with these additional transparency requirements.

Some additional information apart from tax paid is needed to put the tax information into context. The information to be disclosed on a country-by-country basis would include: = the nature of the activities; = the number of employees; = the total net turnover made, which includes the turnover made with third parties as well as between companies within a group; = the profit made before tax; = the amount of income tax due in the country as a reason of the profits made in the current year in that country; = the amount of tax actually paid during that year; and = the accumulated earnings.

This information would have to be disclosed for every EU country in which a company is active, as well as for the so-called tax havens. Aggregate figures would also have to be provided for operations in other tax jurisdictions in the rest of the world. Reporting should also include explanations on discrepancies between the amounts of income tax actually paid and income tax accrued.

This information would be made available in a stand-alone report accessible to the public for at least 5 years on the company’s website. Companies would also have to file the report with a business register in the EU.

= Consultation history. In order to determine whether further transparency on income tax information was needed, the Commission carried out a thorough analysis, which is reflected in the Impact Assessment accompanying this proposal, and summarised in an Executive summary. The Commission consulted a broad range of experts and interested parties from summer of 2015 onwards and it also launched a public consultation. Over 400 respondents representing firms, industry associations, NGOs, citizens and think tanks responded to this consultation, a summary of which is available on the Commission’s website: Factual Summary of the responses to the public consultation on assessing the potential for further transparency on corporate income taxes, January 2016.

= Legal basis of the proposal and the need to amend the Accounting Directive. This work has been undertaken to contribute to the Commission’s overall objective of ensuring that the country in which a company’s profits are generated is also the country of taxation.

This Directive does not propose the harmonisation of taxes, but instead refers to financial reporting obligations as regards income tax information. This is why Article 50 of the Treaty on the Functioning of the Union, which concerns the right of establishment and is the regular legal basis for initiatives in the area of company law, accounting and corporate financial reporting, has been determined to be the appropriate legal basis. The legal proposal amends the Accounting Directive (2013/34/EU) and is therefore based on the same legal basis.

This means that this proposal is subject to qualified majority voting, not unanimity as is the case for legislation dealing with the harmonisation of tax rules.

= Proposal and the Panama Papers. Particular opportunities for tax avoidance and tax evasion emerge in tax jurisdictions which do not respect international tax good governance standards. If multinationals are active in such jurisdictions, special transparency requirements will apply. A specific process is being introduced to provide full, country by country, disclosure within the EU to ensure a higher level of transparency as regards taxes paid by multinational companies in tax jurisdictions posing specific tax challenges (those that do not comply with good governance standards on tax).

= Specific tax challenges relating to this proposal. Panama Papers highlight the relevance of such lists and their potential to target problematic tax jurisdictions, if properly employed. Most of the third countries in which the offshore firms were located already feature on the pan-EU list. In January, the Commission proposed a new EU screening and listing process to identify and act against third countries that willingly enable tax abuse as part of its External Strategy for Effective Taxation. This common EU list will replace the current compilation of the states' diverse national lists for tax purposes, first published in June 2015. The common EU list will be based on clear and internationally-justifiable criteria and a robust screening process. Importantly, the common EU list will also be backed by counter-measures for listed countries that refuse to comply with tax good governance standards.

The application of the internationally recognised tax governance criteria on which the common EU list will be based, and the cooperation with third countries on this matter will help us advance the tax governance agenda internationally. It is therefore crucial that EU states provide unequivocal political support for the common EU approach, so that it can be taken forward without delay.

The new proposal on CBCR uses the same tax governance criteria as the basis for requiring multinationals to disaggregate data reflecting their activities in problematic tax jurisdictions. The new EU list will be presented by the Commission by means of a delegated act, provided for in the proposal. In the meantime, the Commission is making an initial assessment of all third countries’ tax systems from a good governance perspective, as set out in its External Strategy. It will present the first scoreboard results to Member States in autumn 2016.

= Third-country tax jurisdictions’ assessment. Tax jurisdictions will be assessed based on the following criteria set out in the Commission's Communication on External Strategy for Effective Taxation, presented in January 2016:

·         Transparency and exchange of information, including information exchange on request and Automatic Exchange of Information (AEoI) of financial account information;

·         Fair tax competition;

·         Standards set up by the G20 and/or the OECD; and

·         Other relevant standards, including international standards set up by the Financial Action Task Force.

A pre-assessment of all non-EU tax jurisdictions from a good governance perspective will be conducted first. The final decision on whether a tax jurisdiction will be included in the list or not will be taken following a dialogue with the relevant jurisdictions. Member States' experts will be consulted by the Commission in the preparation of the delegated acts. Parliament and Council's experts will have equal access to all meetings and documents. This list will be regularly reviewed and, where appropriate, amended to take account of new circumstances.

The proposal foresees a detailed list of elements that are relevant for citizens to get a thorough understanding of a company’s activities and taxes paid. Our analysis concluded that the information required is appropriate to enable the public to properly scrutinise multinational companies' tax strategies. It will enable citizens to have detailed insight regarding whether companies pay taxes in the country where profits are generated and assess whether significant profits have been shifted outside the EU.

= Additional information beyond taxation. The annual corporate income tax accrued is the key information. It corresponds to the corporate income tax expense shown in the profit and loss statement, excluding deferred taxes. The amount of tax paid will ascertain that the company has actually paid those taxes. Companies are also obliged to explain in a meaningful way the difference between taxes accrued and taxes actually paid. Moreover, companies will be obliged to disclose the amount of accumulated earnings (for example, non-distributed profits). Undistributed profits are not actually a problem; however, high levels of accumulated earnings in tax jurisdictions that do not abide by tax good governance standards can be seen as an indicator of potential attempts to avoid taxes.

= Imposing reporting obligations on non-EU companies. An estimated 6,000 multinationals active in the EU would need to disclose publicly their tax-related information.

Medium-sized or large subsidiaries of non-EU headquartered groups would be subject to the reporting obligation on behalf of their ultimate parent. To be considered as medium-sized or large, a company must exceed two of the following criteria: net turnover of € 8 million (up to € 12 million depending on the state), balance sheet of € 4 million (up to € 6 million depending on the state), and 50 employees on average; for branches, turnover is the sole size criterion.

If a non-EU headquartered company does not have subsidiaries, but only branches, these branches would face similar obligations.

As an alternative for non-EU headquartered firms, a simpler option is offered: all reporting obligations on subsidiaries or branches would be lifted if the non-EU headquarters publishes its country-by-country report on its website, and entrusts one of its EU subsidiaries to file the report on their behalf with an official business register inside the EU.

A subsidiary is a company incorporated in a given country, with legal personality. A branch office opened in the EU is not a separate legal entity from the company that opened it. If that parent company is located outside the EU, the branch must file the financial statements of the company in the relevant business register of an EU state where the branch is located.

Companies established in the EU are already required to disclose certain information in their individual financial statements. These are filed with business registers, and therefore can be accessible to the public. However, it can be complicated and sometimes costly to reconstitute information regarding a group's operations per country on the basis of financial statements published by different subsidiaries.

This proposal will ensure that the information is made available to the public in a comparable, comprehensive and accessible way: this is an important additional tool which should incentivise companies to pay tax in the country where their profits are generated. In short, additional public scrutiny promotes fairer tax competition in the EU and is good for companies.

= The difference between the information shared between tax authorities and the information now being made public. Public reporting does not serve the same purpose as information sharing and reporting between tax authorities.  There are some types of information that are required to be shared between tax authorities, but that are not part of this latest proposal for public CBCR.  EU tax authorities will receive 12 pieces of information, whereas public CBCR will consist of just seven pieces of information. EU tax authorities will receive more granular data for all third countries in which an EU company is active. They will also get from companies more complex data relating to the breakdown of a group's turnover between that made with external parties and that made solely between group entities, as well as figures for stated capital and a company’s tangible assets.

When it comes to public disclosure, it is important that EU citizens get information about where in the EU companies are paying taxes. Citizens also have a legitimate interest in knowing whether companies active in the EU are also active in so-called tax havens. However, demanding publicly disaggregated data for all third countries could affect companies' competitiveness and divulge information on key strategic investments in a given country. Similarly, the disclosure of turnover and purchases within a group poses a threat to multinationals in that it could divulge key information to competitors.

= Public’s monitoring large multinationals taxation. The reports on income tax information would be made available to the public on the company’s website. Firms will also be required to file those reports in the relevant national business registers, which are also accessible to the public. This will enable a comparison of the tax paid by similar companies in similar situations or the tax contributions made to national governments by different companies. It can also help to identify potential weaknesses or loopholes in national tax systems. Up to now, it has only been via Parliamentary enquiries that comparable information has been made available. 

Although it is true that the information will likely be used mainly by individuals and organisations familiar with accounting and taxation issues, the public at large will also be able to see how much tax has been paid in their country. Besides, nothing would prevent multinational companies from providing additional information to complement these figures.

= Reporting requirements to companies with a consolidated turnover above €750 million. The threshold of a turnover above €750 million strikes the balance between targeting the most relevant companies and avoiding unnecessary administrative burdens on smaller players:

·         Firstly, as it is calculated on a worldwide basis it will cover large groups regardless of whether they are headquartered inside or outside the EU.

·         Secondly, it captures only top-tier companies which, due to their size and complexity, are best equipped to engage in aggressive tax planning to the potential detriment of smaller SME competitors. No reference is made to the number of employees as even companies with only few employees may make significant taxable profits.

·         Thirdly, the threshold would cover those companies controlling approximately 90% of corporate revenues made by multinationals, according to OECD figures.

·         Finally, the thresholds are consistent with the international approach agreed by the G-20 leaders as part of the BEPS OECD Action Plan agreed in November by the G-20 leaders.

= Taxes paid in other tax jurisdictions. The main objective of the proposal is to ensure that companies that have activities in the EU pay their fair share of tax here. The proposal requires companies to disclose, for all the information categories, an aggregate figure for all taxes paid outside the EU. This will enable the public to see if the share of taxes paid in the EU corresponds to the share of a group's business within the EU.

In addition, there are specific requirements relating to taxes paid in certain jurisdictions not abiding by good governance standards in the area of taxation. Information relating to such countries must be given in disaggregated form.

Existing tools, e.g. requirements in the Anti-Tax Avoidance Package (ECOFIN, March 2016), will require firms to provide to EU tax authorities detailed country-by-country tax information for all countries where they have activities, both inside and outside the EU.

Requiring further geographical breakdown of information in a public country-by-country report would risk undermining the international level playing field and subjecting companies to increased double/multiple taxation by tax authorities without efficient mechanisms to arbitrate between companies and tax authorities. The impact assessment carried out in advance of this proposal determined that aggregated information as regards other tax jurisdictions in the rest of the world would be sufficient to meet the intended objectives. Since the proposal targets multinational companies, many of which have a limited turnover in the European Union, imposing an obligation to disclose disaggregated information would mean that a relatively small branch or subsidiary in the EU could be subject to the disproportionate burden of being obliged to disclose information relating to a very high number of countries outside the Union. The proposal strikes the appropriate balance between transparency and administrative burden.

= Effects on SMEs. These companies are not covered by the proposal; the measure focuses on multinational enterprises that can afford to engage in tax planning activities, i.e. the largest ones. There is no need to subject small companies to similar measures given their inability in general to shift profits from one jurisdiction to another. The medium-sized or larger subsidiaries of non-EU multinational companies with turnover exceeding €750 million will nevertheless have new obligations. If there are no subsidiaries, these obligations will fall on their branches of a comparable size. This is proportionate and efficient for groups with a turnover exceeding €750 million.

= Creating a level playing field. This proposal puts EU and non-EU companies on the same footing, as both types of company would have the same reporting requirements.

It will also help to create fairer competition between multinational companies and those trading only in one market. Some say that a cross-border company pays on average 30 % less tax than a company active in only one country. This new disclosure requirement will also help to mitigate this disparity. See: Egger, P., W. Eggert and H. Winner (2010), ‘Saving Taxes through Foreign Plant Ownership’, Journal of International Economics. 81: 99–108; Finke, K. (2013), Tax Avoidance of German Multinationals and Implications for Tax Revenue Evidence from a Propensity Score Matching Approach.

= The proposal and the revision of the Administrative Cooperation Directive, or "CBCR to tax authorities". The Administrative Cooperation Directive was revised as part of the Tax Avoidance Package, so as to implement corporate CBCR to EU tax authorities, in compliance with the OECD standards endorsed by the G-20.

The current proposal ties in with this major initiative on several accounts: in terms of scope, the same multinational companies would be subject to the obligation to submit a country-by-country report to their tax authority and to the public. In terms of content, the information to be reported to the public is less detailed in terms of the tax data to be provided than the information to be submitted confidentially to tax authorities.

= Connections with the Anti-Tax Avoidance Package. The ultimate aim of public country-by-country reporting is to enable public scrutiny on multinational companies' tax strategies. This is different from the aim of the exchange of information between tax authorities, which need to enter into the details of compliance with tax laws and potential business secrets. That is why it would not be appropriate to require exactly the same set of comprehensive information submitted by multinational companies to their tax authorities. Moreover, following the consensus developed within the G20, tax administrations are bound by their commitment to keep some parts of this information confidential, as they contain business secrets.

= Banks affected by the new proposal. Since 2015, credit institutions and investment firms established in the EU (hereafter ‘banks’) have had to publish a stringent sectoral country-by-country report pursuant to Article 89 of the Capital Requirements Directive. Any bank in the EU must disclose this report and publish it together with its financial statements. The report includes country-by-country information on the names, nature of activities and geographical location, turnover, number of employees on a full-time-equivalent basis, profit or loss before tax, tax on profit or loss and public subsidies received. Among these banking groups, those with a consolidated turnover above €750 million would fall within the scope of this initiative. In order to avoid multiple reporting, and given the similarities observed with the country-by-country disclosure obligation applicable to banks, the Commission proposes to allow these banking groups to continue to publish solely a country-by-country report in compliance with their sectoral requirements, as long as this report encompasses all of the group’s operations, i.e. including operations that may not be subject to prudential reporting.

However, there are currently no requirements on non-EU parent banks operating in the EU. In this regard, the proposal complements the existing banking legislation: these banks will now have to publish a country-by-country report if their revenues exceed €750 million.

= Effects on extractive/logging industries. These industries in the EU with a turnover exceeding €750 million will now have to comply with this proposal in addition to their current reporting obligations.

The reporting requirements of the two sets of country-by-country reports overlap as regards the amount of corporate income taxes paid. The reporting obligations on extractive and logging industries authorises a de minimis threshold of €100 000 to filter out small payments. No such threshold is proposed in the country-by-country reporting applying to all industry sectors. In addition, the sectoral and general country-by-country reports may have differing geographical coverage and degree of detail. Due to these differences, the same amounts of corporate income taxes paid will have to be reported in different ways in each country-by-country report.

The timelines set out for the country-by-country reports for the extractive and logging industries and for the proposed public country-by-country report also differ, as the latter would have to be filed together with the financial statements, a requirement that does not exist for the former. It is estimated that those differences will entail no significant additional burden for the extractive/logging companies.

= Proposal’s connections with the negotiations on the Shareholder Rights Directive. On 8 July 2015, in the framework of negotiations on the Shareholder Rights Directive, the European Parliament proposed amendments to the Accounting Directive with a view to introducing public country-by-country reporting. This amendment sought to extend to all industry sectors the existing country-by-country reporting which banks started to publish in 2015; the Commission hopes that these negotiations be concluded as quickly as possible.

= Preparation and publication of the report on income tax. EU multinational companies with a turnover above €750 million would be responsible for the preparation of the reports. As regards multinationals headquartered in non-EU countries, the responsibility would lie with the members of the administrative, management and supervisory bodies of the EU subsidiaries or with the person(s) responsible for carrying out the disclosure formalities for EU branches, as provided for in Directive 89/666/EEC.

In these cases, as the report would not have been drawn up by them, their responsibility would be limited to making sure that, to the best of their knowledge and ability, the report has been prepared and published according to the reporting requirements. Companies subject to the publication requirement would have to submit the report to their external statutory auditors who would check that the report has been presented in accordance with the Directive, and made accessible on a website.

= Enforcement at the national level. In case of non-compliance, the penalties already provided in the Accounting Directive would apply. National competent authorities or courts would be entitled to impose fines on companies. These penalties would have to be effective, proportionate and dissuasive. In the case of non-EU multinational enterprises, penalties could fall on all of their EU medium-sized or larger subsidiaries; or on their EU branches.

= Enhancing tax transparency. The 4^th Anti-Money-Laundering Directive already sets standards to bring about more transparency and accountability for companies and banks, making sure that competent authorities have access to relevant information through central registers. The Directive has introduced in particular an obligation for Member States to introduce public registers on beneficial ownership. It is now essential that Member States rapidly transpose these commitments in their national legal order. The Commission is currently revising this Directive, with a view to present a proposal under the Dutch Presidency until the end of June 2016. This revision will primarily aim at addressing risks posed by terrorist financing, but it could also be considered whether additional measures to strengthen the framework are necessary.

The Commission will also explore whether EU rules around financial advice may need to be strengthened to provide stronger disincentives for financial intermediaries as regards customer advice that may lead to tax evasion.

Source: http://europa.eu/rapid/press-release_MEMO-16-1351_en.htm?locale=en