EU officials yesterday joined the fight against international tax dodging, calling for disclosure of tax data related to their arrangements with the bloc's member governments. They also want the companies to disclose information related to offshore havens where they sheltered money.
The proposed new rules had been in the works before the Mossack Fonseca revelations. Following the revelations the plans were modified to include offshore holdings.
The Mossack Fonseca files revealed how some of the world's rich and powerful people might have used offshore bank accounts and shell companies to conceal their wealth or avoid taxes. The European proposal was mainly about stopping multinational companies from shifting their profits around Europe to lower their tax bills.
The proposals which would likely encounter much resistance from some business groups and even European governments that benefited from tax inducements, had a long way to go before they became law, according to commentators.
"By using complicated tax arrangements, some multinationals can pay nearly a third less tax than companies that only operate in one country," EU financial services commissioner Jonathan Hill said in a statement. "Our proposal to increase transparency will help make companies more accountable."
According to a European parliament study, EU countries suffered revenue loss of €50 billion to €70 billion annually.
Only companies with an annual turnover of at least €750 million and with activities in the EU would be covered under the proposed rules. Non-EU firms would also need to publish a tax report if they operated a subsidiary in an EU country.
Companies would need to give a country-by-country account of tax paid and tax accrued, profits, turnover, earnings and number of employees.
Meanwhile, business associations warn the measure would damage EU companies.
"We do not wish to see the EU become a destination which businesses consider too reputationally risky and administratively burdensome in which to invest," said Chas Roy-Chowdhury, head of tax at ACCA, a global accounting body, Reuters reported.