On April 11th, the Austrian Federal Chamber of Labour (AK EUROPA) and the Austrian Trade Union Federation (ÖGB Europabüro) jointly organised the event ‘The EU’s uphill struggle against tax dumping: 2 steps forward, 3 steps back?’ within the framework of the No to Tax Havens! campaign at the premises of the Permanent Representation of Austria to the EU in Brussels.

 

Thomas Neale, head of Unit Direct Tax Policy & Coordination, DG TAXUD, European Commission, remarked in his opening address that, given the fact that amendments to the Anti Money Laundering Directive and the Anti-BEPS Directive had already resulted in important progress regarding combating tax avoidance practices at EU level in 2016, the event might also have been called 'three steps forward, two steps back'. The currently debated proposal on Country-by-Country Reporting (CbCR) is another step towards the right direction. After all, it is not the Commission, but the Council and hence individual Member States that currently slow the process down. [1]

 

The other members of the panel, which was hosted by the journalist Élodie Lamer, however, corresponded in their opinion that the Commission proposal on Country-by-Country Reporting does not go far enough. MEP Evelyn Regner (S&D), who is together with Hugues Bayet also the competent rapporteur for this issue, pointed out how important transparency was to achieve a fair distribution of the tax burden. CbCR as currently debated by the Parliament would provide for publically accessible reporting, and hence represents a major improvement over the OECD-BEPS measures and the Commission Proposal based on it, which only aim at disclosure for competent authorities. In addition, the Parliamentary proposal prepared by Regner and Bayet provides for two additional important amendments: firstly, the threshold value of minimum € 750 million turnover, based on which companies should be covered by the Directive, should be reduced to the already existing threshold of the Accounting Directive of € 40 million and at least 250 employees to include more relevant companies. Secondly, disclosure obligations should not end at EU borders, but also need to refer to activities of European companies outside the EU and to multinational companies operating within the EU. Hence, CbCR would also effect the United States as seat of major multinational companies. However, the disclosure duties associated with CbCR are not to result in less competitiveness, as Regner pointed out. On the contrary: the instrument would represent an important foundation for fair competition, and hence lead to benefits for all, including smaller European companies that pay their tax share.

 

Aurore Chardonnet from Oxfam emphasised the relevance of Country-by-Country Reporting by presenting the Oxfam report ‘Opening the vaults: The use of tax havens by Europe’s biggest banks’. Based on mandatory public CbCR for European banks, which had already been introduced in 2015, this report shows which kind of information and imbalances might be uncovered by the means disclosure obligations. For instance, banks generate about € 628 million of profits in countries, where they do not employ a single person - tax havens! This is why Chardonnet supported the Regner-Bayet proposal, which provides for reporting beyond European borders. In order to be able to combat tax avoidance effectively, the global context needs to be taken into account, and all countries - not only OECD members – need to be involved in this process to avoid creating new loopholes.

 

This position was fully supported by Tove Maria Ryding of Eurodad and Tax Justice Europe. In any case, compared to the current Parliamentary proposal on CbCR, OECD-BEPS represents a step backwards in respect of public accessibility to information, company size or the spatial scope. Global problems require global solutions. And the EU too would benefit from more tax fairness on many levels. Besides from significantly greater tax revenue, the trust of the population, of entrepreneurs and other investors might be regained. Further, publically accessible country-by-country reports would also ensure that people, who expose tax avoidance, such as the whistle-blowers of the Lux-Leaks, are no longer prosecuted on the basis of these important exposures.

 

Gertraud Lunzer, Tax Expert of the Austrian Chamber of Labour Vienna, emphasised the inequality of the overall tax burden to the disadvantage of employees. It is high time to counteract this imbalance. Country-by-Country Reporting and the transparency associated with it could definitely lead to improvements. Apart from the amendments to OECD-BEPS addressed by Regner, from the AK's perspective also the property rights and the actual beneficiaries of the relevant companies have to be disclosed in order to achieve as much transparency as possible. Hybrid constructions for the purpose of tax avoidance also need to be taken into account. The success of individual measures, such as CbCR, also depends on the advancement of other proposals currently debated by the Parliament. For instance, the proposal aiming at a Common Consolidated Corporate Tax Base is crucial to effectively combat tax avoidance within the EU. So far, it is already clear that CbCR needs to be followed by further measures, as the newly achieved transparency is going to uncover new tax loopholes, which need to be closed. The No to tax havens! campaign and the common fight against tax avoidance are hence to be continued.

 

Further information:

AK EUROPA: EU-Directives against tax avoidance in need of improvement

AK EUROPA: Put an end to tax avoidance: we also want to know who does not pay their taxes!

AK EUROPA: Tackling tax avoidance

AK Europa: Legal tax avoidance gets slightly more difficult

AK Europa: Corporate taxation: More tax justice in the European Union?

AK EUROPA Position Paper on Country-by-Country Reporting (CbCR)

AK EUROPA Position Paper on Common Consolidated Corporate Tax Base (CCCTB)

OECD: BEPS-Actions

Oxfam: Opening the vaults: The use of tax havens by Europe's biggest banks

AK/ÖGB campaign No to tax havens!

Some Member States demand an amendment of the legislative basis of the proposal towards the principle of unanimity, as it is required for tax-related resolutions at EU level. However, Thomas Neale points out that CbCR is no Tax Directive in the strict sense, as it does not directly refer to changes in taxation systems, but rather to companies’ disclosure obligations.