The phrase that leaps to mind when one hears that the EU is to demand that major corporations must become transparent about their tax affairs is “poacher turns gamekeeper”. The EC is already engaged in examining whether so-called “sweetheart” deals between some EU member states (including Luxembourg, Holland and Ireland) and corporations trading within the EU breach EU rules. Leaders of the nations involved, including former Luxembourg PM and current EC President Jean-Claud Juncker, have been quick to point out that they have done nothing illegal, but then neither have the corporations. Tax avoidance is a perfectly legal, and, if we are honest, sensible thing – why would any individual or company pay more tax than it needed too? Tax evasion, on the other hand, is a criminal enterprise – the trouble is that the line between aggressive tax avoidance and tax evasion is very thin.
The new moves by the EU (which predate the current Panama Mossack Fonseca scandal) are addressed at corporations with sales revenue above €750 million and will require firms to detail the taxes that they pay in each EU state in which they operate. This type of regulation also applies in specific sectors such as banking, mining and forestry. Ultimately, the new requirements will be applied to smaller corporations, eventually covering 90% of EU corporate revenue.
The requirements will mean that the corporations affected will need to disclose their net turnover figures , pre-tax profit, corporate tax due, accumulated earnings and the tax bills actually paid in the EU states in which they are operating.
It may be that major corporations now realise that they need to be seen to make a significant contribution to society through their corporate tax payments and that a failure to do so could lead to loss of revenue through public boycott campaigns – ordinary citizens have no means to minimise their own tax footprint, afterall.