Twelve member states voted at a meeting of the EU’s Competitiveness Council on 28 November to block the proposed EU directive introducing public country-by-country reporting (CbCR).
The proposed amendment to the accounting directive would require multinational groups with a turnover of more than €750m to report income tax paid on a country-by-country basis, broken down by EU member state. These reports would then be made publicly available.
The amendments to the EU accounting directive were first suggested in April 2016, since when the debate has continued around whether this is a transparency measure requiring only qualified majority voting, or a tax measure requiring unanimity. The EU Parliament voted in favour of the proposal in July 2017 and again in October 2019.
Despite a compromise proposal, which suggested giving companies up to six years to disclose information, the Council’s outcome document recorded that it was ‘not able to gather sufficient support for the presidency's proposal, in particular as regards the proposed legal basis’. However, it also noted ‘broad support for enhanced transparency in the business activities of multinational companies in the various member states’.
The EU presidency said it would continue to work on the proposal, ‘reflecting on the best way for taking it forward’.
Catherine Robins, partner at Pinsent Masons, said: ‘Some countries voted against the EU plan because they objected to the use of qualified majority voting rather than unanimous approval, which is required for tax law’.
‘Other countries have concerns that if it only applies in the EU it puts EU businesses at a competitive disadvantage to those in the US, Japan and China. It may be more acceptable to some countries if public CbC reporting is adopted by the OECD’, Robins added.
The twelve member states who voted against the proposal were: Ireland, Luxembourg, Malta, Cyprus, Latvia, Slovenia, Estonia, Austria, Czech Republic, Hungary, Croatia and Sweden.
Andrew Parkes, national technical director at Andersen Tax UK, commented: ‘It comes as no surprise that Ireland was amongst the 12 countries that voted against the proposal given their reliance on US technology firms. However, possibly of more interest is Germany abstaining. Are they hiding behind Ireland on this?’
The UK did not vote in the council meeting due to election restrictions. However, Finance Act 2016 introduced a power for the Treasury to make regulations at some point in the future requiring large companies to include a country-by-country report in their published group tax strategy.
Twelve member states voted at a meeting of the EU’s Competitiveness Council on 28 November to block the proposed EU directive introducing public country-by-country reporting (CbCR).
The proposed amendment to the accounting directive would require multinational groups with a turnover of more than €750m to report income tax paid on a country-by-country basis, broken down by EU member state. These reports would then be made publicly available.
The amendments to the EU accounting directive were first suggested in April 2016, since when the debate has continued around whether this is a transparency measure requiring only qualified majority voting, or a tax measure requiring unanimity. The EU Parliament voted in favour of the proposal in July 2017 and again in October 2019.
Despite a compromise proposal, which suggested giving companies up to six years to disclose information, the Council’s outcome document recorded that it was ‘not able to gather sufficient support for the presidency's proposal, in particular as regards the proposed legal basis’. However, it also noted ‘broad support for enhanced transparency in the business activities of multinational companies in the various member states’.
The EU presidency said it would continue to work on the proposal, ‘reflecting on the best way for taking it forward’.
Catherine Robins, partner at Pinsent Masons, said: ‘Some countries voted against the EU plan because they objected to the use of qualified majority voting rather than unanimous approval, which is required for tax law’.
‘Other countries have concerns that if it only applies in the EU it puts EU businesses at a competitive disadvantage to those in the US, Japan and China. It may be more acceptable to some countries if public CbC reporting is adopted by the OECD’, Robins added.
The twelve member states who voted against the proposal were: Ireland, Luxembourg, Malta, Cyprus, Latvia, Slovenia, Estonia, Austria, Czech Republic, Hungary, Croatia and Sweden.
Andrew Parkes, national technical director at Andersen Tax UK, commented: ‘It comes as no surprise that Ireland was amongst the 12 countries that voted against the proposal given their reliance on US technology firms. However, possibly of more interest is Germany abstaining. Are they hiding behind Ireland on this?’
The UK did not vote in the council meeting due to election restrictions. However, Finance Act 2016 introduced a power for the Treasury to make regulations at some point in the future requiring large companies to include a country-by-country report in their published group tax strategy.
