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EU to make big firms come clean on tax

BBC News BBC News 12/04/2016
European Union flag © Getty Images European Union flag

Plans to force the largest companies to disclose more about their tax affairs will be unveiled by the European Union on Tuesday.

The rules will affect multinational firms with more than €750m in sales.

They will have to detail how much tax they pay in which EU countries as well as any activities carried out in specific tax havens.

The plans come amid heightened scrutiny of the use of tax havens following the Panama Papers revelations.

Transparency

Lord Hill, the EU's financial services commissioner, said: "This is a carefully thought through but ambitious proposal for more transparency on tax.

"While our proposal on [country-by-country reporting] is not of course focused principally on the response to the Panama Papers, there is an important connection between our continuing work on tax transparency and tax havens that we are building into the proposal."

Country-by-country reporting rules already apply to banks, mining and forestry companies, according to an EU spokesperson.

Under the new proposals, that would be expanded to cover companies accounting for about 90% of corporate revenues in the EU, they added.

The BBC understands that companies will need to disclose information such as total net turnover, profit before tax, income tax due, amount of tax actually paid and accumulated earnings.

The changes come after G20 leaders agreed to follow an OECD action plan to tackle corporate tax minimisation.

Analysis: Theo Leggett, BBC business reporter

This proposal is bound to be controversial. The Commission's plan would oblige companies to report what they earn and how much tax they pay in EU countries. But it would also force them to reveal details of their tax affairs in "third countries which do not respect international tax good governance standards". In other words, secretive tax havens.

This sounds perfectly sensible. Companies which use artificial structures to avoid or minimise tax, or to shelter their gains in tax havens, would find their arrangements exposed to the full glare of public scrutiny. The old legalistic argument that they pay all the tax that they owe might not be enough to deflect bad publicity.

But how do you decide which regions' tax laws aren't up to scratch? Last year, the Commission published a blacklist of 30 'non-cooperative jurisdictions'. The move was condemned by the head of the OECD, who described the criteria it used as unfair and subjective.

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