MEPs will begin the inter-institutional negotiations with the Council of the EU on tax disclosure by country (“reporting”) riven by division between the left and the right of the political spectrum.
Despite the attempt by the Liberal group the previous day to have the vote postponed until September to allow talks to continue among the political groups, on Tuesday 4 July, MEPs approved a mandate for negotiation with the Council on which differences remain but which nevertheless managed to secure a wide majority (534 votes for, 98 against, 62 abstentions).
The final controversy in the final hours of negotiation was on the framing of the safeguard clause, that is, the derogation granted to companies which can demonstrate that publishing information would be commercially damaging to them.
The Socialists and the Greens argued for this derogation to be limited in time. They also wanted companies, at the end of the period of derogation, to be obliged retrospectively to publish the information. The amendment lodged by the EPP Group called for retrospective disclosure of an average of the data required and no time limit. It was the EPP amendment which carried the day, even though some Liberals and two EPP MEPs (Claude Rolin of Belgium and Sirpa Pietikäinen of Finland) voted for the Socialist proposals.
A Commission spokesperson said that this clause would be looked at closely so that it “does not undermine the objectives and spirit of our proposal”. “Nor should this clause give companies carte blanche to avoid reporting”, she added.
In a lively debate in plenary session on Tuesday morning, EPP shadow rapporteur Dariusz Rosati (Poland) stressed the importance of consistency between what the EU is doing and the international agreement reached in discussions at the OECD on its BEPS action plan addressing tax optimisation. Sander Loones (ECR, Belgium) echoed this point. Rosati also felt that EU companies should not be put in a position where they would be at a disadvantage against their American competitors.
One of the joint rapporteurs, Hugues Bayet (S&D, Belgium), said that one of the provisions of the text stated that foreign companies would be subject to the same reporting conditions if they have a branch in the EU. “I don’t know of any company with a turnover of €750 million that doesn’t have a subsidiary in the EU”, he said.
His political ally, Virginie Rozière (France), weighed into the other political groups. She pointed out that Parliament had, several times, called on the Commission to present a legislative proposal on public reporting in each country. “Now that it has at last heard our call and we have a position on the table, some groups are afraid to turn words into actions. Let us not forget who elected us and who we represent in this chamber”, said Rozière, who was involved in the review of the shareholders’ rights directive.
The Socialist rapporteurs took the view more that the glass was half full. It is “a step forward”, according to joint rapporteur Evelyn Regner (S&D, Germany).
Shadow rapporteur for the Greens/EFA Pascal Durand (France) said the text had some good points. It “introduces a safeguard clause reducing the annual turnover threshold” but it also contains “a requirement on the companies involved to reveal the potential tax regimes that apply to the intellectual property from which they benefit”.
Setback say employers, small step forward for NGOs. BusinessEurope tweeted that the Parliament vote was a “setback for EU investment”. EU employers take the view that it is for tax authorities to ensure that companies meet their tax obligations.
Civil society, which demonstrated outside the European Parliament building in Strasbourg, reacted as one. “The Conservatives and Liberals successfully introduced a loophole, which can become a bomb under the efforts to make multinational corporations pay taxes”, said Tove Maria Ryding of Eurodad. The vote is certainly “a small step towards greater tax transparency. But companies can still hide key tax information if they want to, due to a get-out clause”, said Aurore Chardonnet of Oxfam. (Original version in French by Elodie Lamer)