EU reveals way to make big companies stop dodging taxes

The European Parliament approved a set of new rules that will force multinational companies and their subsidiaries to reveal how much tax they pay EU member states in a bid to prevent tax avoidance.

Members of the European Parliament (MEPs) signed off on the measure on Thursday, five years after it was first proposed by the European Commission, having been dragged out due to debate among several EU nations. 

Multinationals and subsidiaries with annual revenues of over €750 million ($858 million) will have to make the amount of tax they pay in each member state public, as part of a move to increase transparency.

“Persistence pays off. Despite all the adversity and a five-year-long blockage in the Council, we can proudly say that the call for more corporate tax transparency has been answered,” MEP Evelyn Regner said following the passage of the new rules.

For too long, corporations have played by their own rules. Thanks to the transparency provided by public country-by-country reporting, we will now be able to shed light on this opaque corporate jungle.

The new rules will force companies to disclose the number of employees, profit and loss figures before tax, the amount of accumulated and paid income tax and accumulated earnings. While the measure will bolster transparency in EU member states, it will also extend to the EU’s list of non-cooperative jurisdictions in an attempt to stop companies moving profits to non-EU tax havens.

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The requirement to disclose tax information is designed to help the EU crack down on tax avoidance, as it seeks to finance the post-Covid economic recovery. The Tax Justice Network think tank has previously estimated that 36% of tax lost by EU member states is because of corporate tax avoidance.

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