Brussels, 11/04/2016 (Agence Europe) - In its impact assessment on public country-by-country reporting, of which EUROPE had sight the day before it was published, the European Commission concludes that by using the threshold of €750 million in annual turnover, it will cover 6500 groups, including 1900 European and 1549 American groups. 65% of these businesses are established in five member states.
The institution explains why it did not go along with the EP's idea of following the broad company definition laid down in the directive on accounting standards to which it will propose amendments tomorrow. The criteria of the directive supported by the EP (turnover of 40 million, 250 employees) would cover 20,000 European groups. However, “the additional benefit could be marginal, as it would have an impact on businesses which may not have multinational operations and are less able to undertake aggressive tax planning”. Two further options were examined and rejected, such as covering all large entities of public interest.
As regards its original idea of requiring a country-by-country breakdown only for the EU (which was changed in the light of Panama Papers to include tax havens as well: (see EUROPE 11528), it refers, amongst other things, to the concerns of the OECD that certain countries would stop submitting the reporting information to the tax administrations, if certain partners went down the full publication road. The Commission also highlights the “significant” risks of double taxation.
Country-by-country declaration for the whole world could also “impinge upon the bilateral and international trade relations of the EU, as it would require non-European groups to provide information on their global operations, even when there is no connection with the EU”.
Regarding the nature of the information to be published, the impact assessment indicates that the list of subsidiaries is not particularly relevant, given the objectives. When a group provides information broken down by country, the list of subsidiaries would not add much in terms of useful information. Large and medium-sized businesses already have to provide this information under the accounting directive; this, therefore, would duplicate the requirement. The directive furthermore states that companies may be exempted from this if it could be seriously detrimental to them, and the Commission sees no need to change the existing approach.
On the value of assets, another matter the Commission is not insisting upon, the impact assessment flags up considerable risks to the competitiveness of companies, particularly if this information is combined with the number of staff. The Commission takes the view that this could provide a company's competitors with key information on strategic decisions related to investments, or even on the profitability of the company. It also finds that publishing information on public subsidies would not be greatly helpful towards the aim of the directive. Stating the total amount of subsidies whilst showing just a fraction of the company's tax contributions in a given country could also turn out to be “misleading”.
The Commission concludes that the option decided upon (before Panama Papers) would ensure a level playing field between multinational companies (EU and global). It finds that the European requirements for reporting are reasonably similar to the American standards. It also believes that the cost of publishing this information would be lower, but that publishing it would have a positive impact on attitudes towards taxation. (Original version in French by Elodie Lamer)