Brussels, 08/03/2016 (Agence Europe) - On Tuesday 8 March, the Finance Ministers of the EU decided on a common position on country-by-country reporting to the tax administrations, brought in by European legislation by means of amendments to the directive on administrative cooperation. Amongst other things, this allowed them to clarify that they do not want this directive to lead to commercial, industrial or professional information being disclosed.
“If we agree on this directive, we should also agree that we will not in the future publish the information. That was a precondition to any agreement: the data will not be published, it will only be used by the tax administrations; that must be respected, even in the future”, the German finance minister, Wolfgang Schäuble, told the public deliberations.
Furthermore, the member states added a recital to the Commission's text, clearly stating that the exchange will not lead to the disclosure of confidential information, be it commercial, industrial or professional, or of commercial procedures or information the disclosure of which may run counter to other public policy objectives.
The Maltese minister, Edward Scicluna, also said that he supported the notion of reserving the information for the tax authorities.
The text on the table “does not make provision for the information to be made public and does not make provision for this to be the case in the future; the information laid down in the directive shall be dealt with under the umbrella of administrative cooperation”, pledged the Commissioner for Taxation, Pierre Moscovici. He did, however, go on to say that this was without prejudice to “what we may come to do subsequently”.
When questioned at a press conference about the obvious reluctance of Germany, Pierre Moscovici explained that the Commission would take its responsibilities on the basis of the impact assessment currently being carried out into the publication of the reports.
On behalf of the Presidency of the Council, the Dutch Minister, Jeroen Dijsselbloem, explained that he would welcome a proposal in favour of public reporting, which would be a separate proposal from the one on the table at the moment. “We should not be discouraged by certain signals at this stage”, the Minister said. According to a diplomatic source, it is more likely to be the Competitive Council which will examine the future proposal for reporting of this kind, which suggests that it could take the form of amendments to the directive on accounting standards. However, the states are reluctant to allow the discussions on tax information to leave the framework of unanimity, but a Commission source confirmed that there will be a qualified-majority proposal, under co-decision.
The NGOs reacted en masse to the announcement of the consensus on the amendments to the directive on administrative cooperation, calling once again for the reporting to be made public. “Country-by-country reporting is an integral piece of the anti-tax avoidance puzzle, but keeping these reports confidential will make it nearly impossible for developing country governments, journalists or the general public to scrutinise the operations of multinational corporations”, said Koen Roovers of the Financial Transparency Coalition. Speaking on behalf of the NGO Oxfam, Aurore Chardonnet welcomed the future proposal on public reporting, but said that this would have to cover the vast majority of multinationals. She explained that due to the high threshold for reporting to the authorities (consolidated turnover of €750 million), just 10% to 15% of multinationals will be covered.
On the eve of the Ecofin Council, the European insurance sector questioned the “additional advantages of a proposal of this kind and continues to be of the opinion that there is no need for the EU to bring in other requirements on transparency which would go beyond the recommendations of the OECD”, Insurance Europe stated in a press release.
Secondary reporting to be compulsory from 2017
Legally, no political agreement is currently possible at Ecofin, because the EP has not returned its opinion and the United Kingdom still had parliamentary reservations. The final compromise text will remain unchanged (see EUROPE 11502 for details), with just one exception. During the debate, Wolfgang Schäuble pointed out that there was a discrepancy between the text on the table and the OECD's BEPS action plan to fight aggressive tax planning.
In line with the OECD text, the legislative proposal provides for a secondary reporting mechanism, in the event that the ultimate parent company of a group is not obliged to do so for any reason. In such cases, a subsidiary of the group may be obliged to submit the country-by-country reporting in the state in which that subsidiary has its headquarters.
In BEPS, “the secondary reporting mechanism is only an option” whereas in the text of the directive, “it's an obligation”, the German minister explained, adding that this would hinder the existence of a level playing field with third countries. Germany therefore proposed the compromise of retaining the optional nature of the secondary reporting in 2016, not making the mechanism compulsory until 2017. By that time, other countries, such as the United States, will also have started to implement the reporting, he explained. The Czech Republic, Malta, France, Finland and Luxembourg said that they supported the German proposal. The Spanish minister, Luis de Guindos, explained that provisions brought into the Spanish legislation provided for a kind of secondary reporting when the parent company of the group was established in a third country and that this had not created any problems, but he nevertheless rallied behind the compromise, as did Italy.
The possibility for the member states to impose sanctions in the event that a subsidiary failed to obtain all of the information was kept in the final text. (Original version in French by Elodie Lamer)