The EU unveiled plans to force the world’s biggest multinationals to fully report earnings and pay their fair share of taxes, saying the Panama Papers scandal added to the need for change.
The European Commission, the EU’s executive arm, said under the new rules big companies operating in Europe would have to make public what they earn in each member state of the 28-nation bloc.
Country-by-country reporting has for years been a major demand of tax activists who accuse big corporations of secretly shifting profits from major markets to low tax jurisdictions, often through the use of shell companies such as those exposed in the Panama Papers leaks.
“The Panama Papers have not changed our agenda but strengthen our determination to make sure taxes are paid where profits are generated,” EU Financial Services Commissioner Jonathan Hill told a news briefing at the European Parliament in Strasbourg, France.
Longstanding criticism of corporate tax policy blew up into the open with the Lux Leaks scandal in 2014, which exposed the secret sweetheart tax deals given to huge corporations --including the likes of IKEA and Pepsi -- by the small duchy of Luxembourg.
Multinationals have for long been criticised for not paying taxes in countries where they book profits, instead these companies pay it in places where tax rates are low. India has been among the companies that have been very vocal in opposing this practise. It robs India of taxes from companies making huge profits here.
Corporate tax rates at 30% in India is higher than many countries that are part of EU.
Hill is Britain’s representative on the Commission and a close political ally of Prime Minister David Cameron, who is under pressure in London for family links to an offshore fund exposed in the Panama Papers.
“This proposal is a simple, proportionate way to increase large multinationals’ accountability on tax matters without damaging their competitiveness,” the Commission said in a statement.