To the displeasure of some and the delight of others, EU member states in the Council have, on 25 February, finally approved their position on public country by country reporting (CBCR). This clears a major long-standing obstacle to implementing public CBCR in EU law, but is the trickiest step still ahead?
Public CBCR was controversial ever since it was first proposed by the Commission in the EU’s Accounting Directive back in April 2016. The proposal would oblige multinationals operating in the EU, with a turnover of €750m or more, to publicly disclose on a per country basis certain key information, such as the number of employees, net turnover, profits and losses before tax, the amount of income tax accrued and paid, and the amount of accumulated earnings.
A number of member states opposed the proposal from the outset. One of the main concerns was over legal basis for the measure. What many viewed as essentially a tax measure was being proposed as an amendment to the Accounting Directive. This meant its approval could be made with a qualified majority of EU member states in the Council, and with the European Parliament having an equal say in the legislative process. (The alternative, using taxation as the legal basis, would have meant that the Council would have to approve with unanimity, and the European Parliament would merely be consulted for its non-binding opinion.) The concern was that this would set a dangerous precedent for the EU adopting tax related files using non-tax decision making procedures, and it would be a breach of member states’ national sovereignty on taxation.
A sufficient blocking minority of EU prevented the Council from adopting its position for almost five years. However, at the 25 February meeting of EU economic affairs and competitiveness ministers, a sufficient majority of member states – Finland, Greece, Denmark, Estonia, Austria, Romania, Poland, Netherlands, Italy, Slovenia, Spain, France, Bulgaria and Belgium – has now backed the proposal. The turning point was thought to be Austria’s shift in position, which tipped the scales against the blocking minority.
With the Council position now adopted, the next step is for the EU member states to find a compromise agreement with the European Parliament, which had approved its position in 2017. The Parliament’s position is more far reaching than the position of the Council or the initial Commission proposal. In the Commission proposal and the Council’s adopted position, the CBCR information would only have to be broken down per country for EU member states, and for jurisdictions listed on the EU’s blacklist of non-cooperative jurisdictions in the area of tax. For the rest of the world, total aggregate figures would suffice. The Parliament, on the other hand, would like the CBC breakdown to be for all countries where a multinational operates.
This is just one of several key differences in the Council’s and the Parliament’s respective positions - which seem irreconcilable. The Council appears to have little leeway to compromise, given the narrow margin by which its own position was adopted.
It appears then that the Parliament now faces a dilemma: does it stick to its own position and risk failing to reach agreement with the Council? Or does it compromise in order to ensure that a general public CBCR is enshrined in EU law, albeit in a more limited form?
Home >Articles > EU watch: the latest on public CBCR
EU watch: the latest on public CBCR
To the displeasure of some and the delight of others, EU member states in the Council have, on 25 February, finally approved their position on public country by country reporting (CBCR). This clears a major long-standing obstacle to implementing public CBCR in EU law, but is the trickiest step still ahead?
Public CBCR was controversial ever since it was first proposed by the Commission in the EU’s Accounting Directive back in April 2016. The proposal would oblige multinationals operating in the EU, with a turnover of €750m or more, to publicly disclose on a per country basis certain key information, such as the number of employees, net turnover, profits and losses before tax, the amount of income tax accrued and paid, and the amount of accumulated earnings.
A number of member states opposed the proposal from the outset. One of the main concerns was over legal basis for the measure. What many viewed as essentially a tax measure was being proposed as an amendment to the Accounting Directive. This meant its approval could be made with a qualified majority of EU member states in the Council, and with the European Parliament having an equal say in the legislative process. (The alternative, using taxation as the legal basis, would have meant that the Council would have to approve with unanimity, and the European Parliament would merely be consulted for its non-binding opinion.) The concern was that this would set a dangerous precedent for the EU adopting tax related files using non-tax decision making procedures, and it would be a breach of member states’ national sovereignty on taxation.
A sufficient blocking minority of EU prevented the Council from adopting its position for almost five years. However, at the 25 February meeting of EU economic affairs and competitiveness ministers, a sufficient majority of member states – Finland, Greece, Denmark, Estonia, Austria, Romania, Poland, Netherlands, Italy, Slovenia, Spain, France, Bulgaria and Belgium – has now backed the proposal. The turning point was thought to be Austria’s shift in position, which tipped the scales against the blocking minority.
With the Council position now adopted, the next step is for the EU member states to find a compromise agreement with the European Parliament, which had approved its position in 2017. The Parliament’s position is more far reaching than the position of the Council or the initial Commission proposal. In the Commission proposal and the Council’s adopted position, the CBCR information would only have to be broken down per country for EU member states, and for jurisdictions listed on the EU’s blacklist of non-cooperative jurisdictions in the area of tax. For the rest of the world, total aggregate figures would suffice. The Parliament, on the other hand, would like the CBC breakdown to be for all countries where a multinational operates.
This is just one of several key differences in the Council’s and the Parliament’s respective positions - which seem irreconcilable. The Council appears to have little leeway to compromise, given the narrow margin by which its own position was adopted.
It appears then that the Parliament now faces a dilemma: does it stick to its own position and risk failing to reach agreement with the Council? Or does it compromise in order to ensure that a general public CBCR is enshrined in EU law, albeit in a more limited form?
