EU tells companies to reveal how much tax they pay by country in latest avoidance crackdown

Businesses will be forced to declare how much they make in each European country and in certain tax havens as part of an attempt to curb schemes that shift profits out of the reach of tax collectors.

The plan to introduce country-by-country reporting in Europe is the latest global curb on corporate tax avoidance following criticism of structures set up by firms including Google, Amazon and Starbucks to divert earnings into low-tax countries.

The reforms, which have been in the works for several years, have been expanded to include tax havens in the wake of the Panama Papers leak, which detailed the personal and corporate tax avoidance schemes set up using shell companies administered by Mossack Fonseca.

Under the EU plans, about 6,500 multinational firms with global revenues above €750m a year would have to reveal turnover, staff numbers, profits and tax paid in each EU state as well as in several nations deemed to be tax havens, which are yet to be named.

“Our economies and societies depend on a tax system that’s fair, a principle that applies both to individuals and to business. Yet today, by using complicated tax arrangements, some multinationals can pay nearly a third less tax than companies that only operate in one country,” said Jonathan Hill, the EU commissioner responsibly for financial stability.

He told reporters that the Panama leak “hasn’t changed our agenda, but it has strengthened our determination to make sure that taxes are paid where profit is generated”.

The new rules, which must be approved by the European Parliament and the EU Council, would apply to all large companies operating in the EU, regardless of where they are based.

The OECD club of rich nations has already proposed similar transparency rules under its crackdown on profit shifting, which was agreed by leaders last year.

However, transparency campaigners at Oxfam said the EU rule change was light on detail and risks being “close to pointless” if companies could simply shift earnings beyond the borders of the new rules.

“The new plans only require big companies to report on their activities in the EU and a yet-to-be-decided list of tax havens that is likely to be arbitrary and limited,” said Oxfam’s boss Mark Goldring.