The EU executive are currently developing a new piece of legislation that will legally compel big US multinationals like Amazon, Google and Facebook to publicly announce their tax bills and earnings in the European Union.
The legislation is set to be tabled by the EU commission in early April and it is intended to increase the level of public scrutiny that these companies come under when they pay taxes to European governments.
Three senior officials who are familiar with the proposals have said that an assessment that is ongoing has said that they should be obliging these large international companies to publicly report their profits and also to declare how much tax they are paying in each EU member state.
It is rumoured that the president of the commission, Jean Claude Juncker, is strongly in favour of the proposed legislation. Officials stated that many in the commission now agree that the world ‘s biggest companies should indeed have to do such a thing, including US companies.
People “are currently finalising the impact assessment work. It ‘s likely there will be some form of legislative initiative announced for the beginning of April Ö for public country-country reporting.”
Another source stated that the bill “will likely target the large multinationals, all multinationals and not just EU ones”.
One of the biggest reasons that public tax reporting is seen as so important is the fact that without it, companies can often cut secret trade deals with governments in order to hide the amount of profit they are really making or at least be able to report it different ways.
The commission came under heavy criticism a month ago when it said that it was considering making companies report only to the national tax authorities in the EU, without making such information available to the public.
It is understood that the new version of the legislation will be put forward at some point in April. Normally, tax legislation has to be approved by all 28 governments in the EU but because this will be passed as an amendment to existing legislation it only needs a qualified majority of 16.
Many people were shocked in the wake of the Luxleaks scandal back in 2014, when it became apparent that hundreds of multinational corporations had managed to agree on secret deals with Luxembourg in order to avoid paying billions of euros in their taxes.
Magrethe Vestager, the competition commissioner, has already fined both Starbucks in the Netherlands and Fiat in Luxembourg guilty of tax avoidance. Both of the companies were forced to pay Ä30m in overdue taxes. She also forced 35 multinational companies in Belgium to pay back over Ä700m in dodged taxable revenue. Amazon in Luxembourg and Apple in Ireland are both also facing investigation.
It is currently being reported that the threshold for the companies that will be affected by this bill has not yet been decided. However, it will certainly cover all “large” global multinationals and that means that Amazon, Google and Facebook will all be affected.
It is believed that many in Washington are already ready angry because of what they see as the unfair targeting of US tech companies in the EU.
The US Treasury ‘s Robert Stack has said that he is worried about the “basic fairness” of these EU investigations.
The European Network on Debt and Development is a group of 46 NGOs that are campaigning for a fairer financial system. Tove Maria Ryding works for them, she said:
“That would obviously be a very big problem. If you want to have a situation where small and medium-sized enterprises who don ‘t use these tax structures can compete, then we can ‘t leave 85% of the multinationals with very obvious loopholes that mean that they can avoid taxation.”
Many people were outraged at the recent news that George Osborne had agreed to allow Google to pay a paltry £130m in tax for last year. The Chancellor hailed it as a momentous agreement but many thought it was a ludicrously small amount of money for a multi-billion dollar company to be paying.
The executive director of Tax Justice Network, John Christensen, said:
“For a very long time big companies have been saying their tax affairs are a matter of competitive confidentiality. We think it is incredibly important as a matter of principle that this information is made public.”