In early December, it was the turn of the lawyers of the European Parliament to return their opinion on the legal base selected by the European Commission in its proposal for public country-by-country reporting. This reporting would require large multinationals to publish certain accounting information such as tax paid, profits made, etc.
This proposal is beyond controversial. Businesses are up in arms against what they see as a threat to their competitiveness, whilst civil society considers it a panacea to fight aggressive tax optimisation by large groups. For the member states, as well, it is a proposal affecting taxation matters despite being dealt with under co-decision with the European Parliament and by qualified majority at the Council (article 50 of the TFUE). However, taxation matters have always been in the exclusive domain of the Council, ruling by unanimity. By request of several states, the Council lawyers examined the legal base selected by the Commission and concluded in mid-November that it should be replaced with a legislative proposal based on article 115 of the TFEU, to be ruled on unanimously by the member states (see EUROPE 11667).
Since then, the Commission has produced a legal opinion in which it sticks firmly to its choice of legal base on the grounds not of taxation, but company law (see EUROPE 11684). 12 states (Sweden, Germany, Finland, Slovenia, Ireland, Hungary, Estonia, Cyprus, Luxembourg, Austria, the Czech Republic and Croatia) have called on the Commission to change the legal base of its proposal.
In its legal opinion, of which we have had sight, the European Parliament argues that the aim of the proposal is to "enhance transparency and public scrutiny on corporate income tax and to foster corporate responsibility by imposing on certain companies disclosure requirements regarding their income tax".
Readers may recall that the Council takes the view that in order to make article 50 an appropriate legal base, the protection of public interests must absolutely justify the coordination of the necessary protections. However, the proposal makes no reference to the specific threat to public interests caused by multinationals, requiring access to tax information in order to protect these interests, the Council lawyers write. They go on to stress that the interests that genuinely need to be protected are those of the national treasuries in fighting tax evasion.
In Parliament's view, the proposal is based on the hypothesis that the publication of this information "protects the interests of the public (…). In order to test this assumption, it should be recalled that the public is the beneficiary of companies' compliance with tax laws (...), as welfare and security for the public is implemented through public policies largely financed by taxes", the Parliament's legal services argue.
Other legal arguments have been put forward, but the conclusion of the Parliament's lawyers seems to be quite unequivocal: the Commission selected the right legal base.
The question of the legal base will be discussed at the Council in 2017
At the Council, the question will not be dealt with until next year under the Maltese Presidency. It was to have been put to the national ambassadors this week, but this will now not be the case.
As the Commission is refusing to change its legal base, it will require a unanimous decision of the member states to allow it to be carried. France would probably have been the only state to oppose the change. However, the French justice system has suspended a similar measure and it is therefore difficult to say what its final position might be.
If there is a change of legal base, Parliament will have to wait for the directive to be adopted before it can challenge the legal base before the CJEU. (Original version in French by Élodie Lamer)