THE LEADERS OF EU countries and members of the European Parliament have reached a deal on tougher tax transparency measures for multinationals in the bloc, as international pressure grows for greater scrutiny of major companies.

The directive will apply to multinational companies with an annual turnover of more than €750 million, and needs to be supplied within 12 months of the balance sheet date.

They will be required to declare their profits, how many people they employ and how much tax they pay in each EU country where they operate.

Member states have a year and a half to transpose the directive into national law.

Ireland’s EU Commissioner Mairéad McGuinness, in charge of financial services and stability, heralded the decision as “great news”, despite it threatening Ireland’s status as a 12.5% tax haven for huge global companies.

“Multinational companies will have to report on revenues and the taxes they pay in EU countries and outside the EU – a significant step towards a more transparent tax system,” she said.

Bloomberg reported today that the latest EU tax move is part of a series of tax transparency initiatives that “may eventually undermine [Ireland's] coveted status as a haven for multinationals”. 

The deal was agreed last night by negotiators, but still has to formally approved by MEPs at a full sitting of the EU parliament, and by the European Council (or the group of EU leaders).

Portugal, which currently holds the six-monthly rotating chair of the European Council, hailed the obligation for public country-by-country reporting as a major step forward for tax justice.

The EU measures were first proposed in the wake of a series of international financial scandals revealed in major investigations such as LuxLeaks and the Panama Papers.

“At a time when our fellow citizens are trying to overcome the effects of the pandemic, it is more crucial than ever to demand real financial transparency,” said Portugal’s Economy Minister Pedro Siza Vieira.

He estimated the European Union’s losses from tax evasion to be €50 billion a year.

The new agreement comes as US President Joe Biden is pushing the need for a 15% minimum tax for multinationals back up the international agenda.

Biden’s proposal is due to be discussed by finance ministers from the Group of Seven wealthy nations at a meeting in London on Friday.

Some campaigners for tax justice however said the measures did not go far enough; Transparency International EU said the proposed measure would not work.

“EU legislation on country by country reporting set to be finalised is not fit for purpose,” the campaign group tweeted. “It won’t apply to most company operations and tax avoidance will continue.”

With reporting from © AFP 2021