EU agreement fails to deliver on expectations for real corporate tax transparency

Today, EU negotiators struck an agreement on the public Country-by-Country Reporting proposal. The deal means companies with operations in the EU will be required to publish information on how much tax they pay in EU countries and non-EU countries that are on the EU’s black or grey list. Information on other non-EU countries will only be available on an aggregated global basis.

Jim Clarken, Chief Executive of Oxfam Ireland said:  “This agreement falls short of expectations following the major breakthrough earlier this year when EU governments gave their first green light to tax transparency. The deal fails to force companies to provide real country-by-country reporting as it leaves over three-quarters of countries in the world off the list. Instead, EU legislators have granted multinational corporations plenty of opportunities to continue dodging taxes in secrecy by shifting their profits to tax havens outside the EU, like Bermuda, the Cayman Islands, and Switzerland. The deal also leaves poorer countries in the dark by failing to shine a light on the activities of multinationals in their countries.

“The EU legislators gave tax havens and tax-dodging companies a free pass during a time when tax revenues are vitally needed to boost the economy. Most of the world's real tax havens are not on the EU's blacklist and will not be reported on separately. We need everyone to pay their fair share of tax, not least multinational corporations, some of which recorded huge profits during the pandemic.

“The has EU failed to answer demands of citizens, investors, unions and civil society for real corporate tax transparency. Many corporations already do real public country-by-country reporting and the US has a deal on the table. This decision shows the EU is not in step with current global trends, instead it is lagging behind them.”

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Contact

Caroline Reid | Communications Manager | caroline.reid@oxfam.org

Notes to editors:  

• Today, in the third trialogue meeting the representatives from the European Parliament and the Council reached an agreement on the Directive regarding “disclosure of income tax information by certain undertakings and branches”. The text must now go through formal approval by adoption in the European Parliament Committees (JURI and ECON), the European Parliament’s plenary, and in the Council. Most agreements reached in trialogue meetings are subsequently adopted without substantial amendments.  
• The European Commission in 2016 sent a draft text to the European Parliament and Council in the wake of the Luxleaks scandal. The European Parliament passed the file to the Council in July 2017 and the Council agreed on a first compromise text in February 2021. Only the European Parliament’s proposal included disaggregated data at the global level.  

According to Oxfam, the compromise has the following serious weaknesses:  

1. an obligation for companies to publicly report information on a country-by-country basis only for their operations in EU members states and countries included in the blacklist or greylist (for 2 consecutive years) of the EU list of non-cooperative jurisdictions;  
2. a “corporate-get-out-clause” allowing a reporting exemption for “commercially sensitive information” for 5 years; and 
3. a reporting requirement applied only to companies with an annual consolidated turnover above EUR 750 million. This will exclude 85 - 90 per cent of multinationals. 

• Transparency for only the 27 EU member states and the 21 currently blacklisted or greylisted jurisdictions means keeping corporate secrecy for over 3 out of 4 of the world’s nearly 200 countries.  
• 80 civil society organisations, trade unions and networks from across Europe in April, 63 trade unions and CSOs in May, investors representing US$5.6 trillion in assets and 133.000 citizens so far have called for a real public country by country reporting. This includes an obligation for companies to report their profit and tax paid in every country they operate in – not just EU countries and EU-listed tax havens. 
• Oxfam has highlighted the weaknesses of the EU blacklist and greylist and how it fails to capture real tax havens. Not one of the world’s 15 worst tax havens are on the EU’s list.  
• With the current compromise, people in low-income countries would not have access to information about multinational companies’ profit made or tax paid in their countries. Moreover, under the OECD system, most tax authorities in low-income countries, unlike in EU countries, do not have access to the confidential country-by-country reports.  
• The U.S. Congress recently introduced legislation that would require full, public, and global country-by-country reporting. It passed the relevant committee in the House two weeks ago. 
• The EU already requires public country-by-country reporting covering all countries inside and outside the EU for companies in the financial and extractives sectors. Since January 2021, some multinational companies have voluntarily adopted this reporting through the GRI tax standard. Oxfam, Transparency International, researchers and others have used this information to document and analyse the tax affairs of multinational companies.