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EU seeks to shame tax-free riders with business disclosures

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(Bloomberg) — European Union regulators sought to shame big global companies into paying their full tax bill by forcing them to publish how much they divert to offshore havens.

Amid the fury over the Panama tax-cheating leaks, roughly 6,500 companies with EU operations would be required to make public taxes paid to havens on an as yet undetermined blacklist. A fight looms over the blacklist, to be based on an existing informal EU list of 30 “non-cooperative tax jurisdictions” including Panama, the Bahamas and Monaco.

“The Panama Papers have not changed our agenda, but I think they have strengthened our determination to make sure that taxes are paid where the profits are generated,” EU Financial Services Commissioner Jonathan Hill told reporters on Tuesday in Strasbourg, France.

The EU estimated that its 28 national governments lose 50 billion euros ($57 billion) to 70 billion euros a year in revenue from companies that shop the world for tax bargains, according to a statement.

Illegal Subsidies

The European Commission proposal, which requires approval by EU governments and the European Parliament, would catch multinationals operating in the EU with global sales of at least 750 million euros.

The Panama leaks came as the EU was tightening up policies in response to revelations in 2014 of Luxembourg’s sweetheart tax deals with companies including Inc. and McDonald’s Corp.

The Brussels-based commission, which enforces the bloc’s free-market rules, is probing whether the custom-made tax breaks offered to those companies and others constitute illegal subsidies.

Competition Commissioner Margrethe Vestager has already issued the first rulings. In October she ordered Luxembourg to claim back as much as 30 million euros in unpaid taxes from a Fiat Chrysler Automobiles NV financing unit, and the Netherlands to collect a similar amount from Starbucks Corp.

Sensitive Data

EU finance ministers took another step to clamp down on tax avoidance in March by agreeing to share corporate tax data among national tax authorities.

Tuesday’s proposal would require that data to be made public, stripped of potential business secrets. Taxes paid to individual havens would also be publicized, along with an aggregate figure for the amount paid outside the EU.

Seven data points will be put into public registers, broken down by country: taxes paid, taxes due, pretax profit, revenue, number of employees, business profile and accumulated earnings.

The proposal was crafted as accounting legislation which passes by a supermajority vote, so that no country can veto it singlehandedly.

See also:

‘Panama Papers’ train new spotlight on global elites’ wealth

Panama Papers reflect well on capitalism (but not kleptocrats)

A conversation with Panama’s suddenly notorious offshore lawyers

Panama has company as bank-secrecy holdout, as U.S. offers haven



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