As expected, representatives of the European Parliament and the Council of the EU reached an agreement on the evening of Tuesday 1 June, on the proposed directive to increase public country-by-country reporting (‘CBCR’) (see EUROPE 12731/14).
“It has been a long road. We would have liked to see a stronger position on transparency from the Council of the EU, which would have allowed for a more ambitious agreement”, said European Parliament co-rapporteur Ibán García del Blanco (S&D, Spain) in a statement. Nevertheless, he welcomed the fact that the co-legislators had managed to reconcile their positions after five years of deadlock.
Unsurprisingly, the final text is very close to the revised mandate given to the Portuguese Presidency at the end of May (see EUROPE 12726/19), but the European Parliament obtained some additional concessions.
Under the agreement, companies operating in the EU with an annual turnover of more than €750 million will have to disclose country-specific tax information, such as the company’s turnover and net profit, the number of employees, income tax paid, and the amount of accumulated profit. This information will have to be disclosed for each EU Member State on an annual basis.
On the thorny issue of the activities of European companies in third countries, the co-legislators decided that the obligation to communicate this information would apply to third countries on the black list of non-cooperative jurisdictions from a fiscal perspective, as well as to third countries that have been on the ‘grey’ list of countries that have made certain commitments in favour of tax transparency for at least 2 years (instead of the 3 years envisaged).
In practice, 19 third countries would be concerned (the 12 countries on the ‘black’ list and Australia, Botswana, Eswatini, Jordan, the Maldives, Thailand and Turkey). Information for other third countries will only be available on an aggregate basis.
The ‘comply-or-explain’ clause, which was desired by the Council of the EU, has been omitted from the final text, since the European subsidiary of a multinational company based in a non-EU country will have to publish all the information it has, even if the parent company does not want to cooperate.
The duration of the safeguard clause, which would allow a company involved to omit certain sensitive accounting data - the disclosure of which would be detrimental to its commercial position - has been set at 5 years, in accordance with the revised Council mandate.
The duration of the revision clause, on the other hand, has been extended to 4 years (instead of 5) and will cover the review of the €750 million total annual turnover threshold, the geographical scope, the safeguard clause, and the information that companies must disclose.
For the rest, it should be noted that the country reports will be available free of charge, in an official EU language, using a common template and in an open data format, as requested by the European Parliament. The transposition period has also been reduced from 24 to 18 months.
In the eyes of the negotiator for the Renew Europe group, France’s Stéphane Séjourné, this is a “balanced agreement, which will allow everyone to have free access to comparable data while ensuring the competitiveness of our companies on an international level by protecting the most sensitive information.”
He was satisfied, as was the Greens/EFA group. French MEP Damien Carême said the agreement was a “major step forward”, despite the flaws that will need to be corrected when the text is revised.
For Manon Aubry (The Left, France), on the other hand, it is a “cut-price agreement that will not bring to light all the tax evasion schemes, with many holes in the racket that will undoubtedly be widely used and exploited by large, multinational companies”.
The agreement has also been strongly criticised by NGOs, including Transparency International, which has called on the Council of the EU and the European Parliament to reject the text. (Original version in French by Marion Fontana)