Naomi Fowler ■ The Netherlands comes out in support of public country-by-country reporting
Here’s some good news. Policy advisor on tax justice and economic inequality at Oxfam Novib, Francis Weyzig writes how the government in the Netherlands has come out in support of public country by country reporting.
The Dutch government has acknowledged the importance of public Country by Country Reporting (CBCR) by multinationals with a presence in the EU per country worldwide, including for each non-EU country separately.
The Minister of Justice, who is responsible for the Netherland’s legislation on the reporting requirements of legal entities, sent a letter to parliament on 19 Oct 2016 explaining the new Dutch position in the ongoing EU negotiations, in response to a parliamentary resolution calling for separate data per non-EU country.
The letter says the government of the Netherlands supports the resolution because it acknowledges the underlying rationale. It refers to an “emerging worldwide understanding that transparency is necessary for a fair distribution of money flows, to fight corruption, and to restore trust in national and international tax systems.” (approximate translation)
However, the Ministry also emphasises doubts about legal possibilities of enforced publication of CBCR data for non-EU countries by EU subsidiaries and branches of multinationals headquartered outside the EU. This is about so-called extraterritoriality: EU subsidiaries cannot force their non-EU parents to provide them with the required data, and there may be no legal basis for enforcement actions of EU member state authority targeting non-EU parents.
Therefore, considering multinationals with non-EU parents, the NL government favours a “comply or explain” approach for the separate reporting per non-EU country. The effectiveness of such a approach might depend on the interpretation of “explain”. Yet the letter signals that the NL government would support an obligation for all multinationals with a presence in the EU to report about each non-EU country separately, if there would be a sufficient legal basis to enforce that.
Finally, the letter implicitly acknowledges that the legal basis for the EU proposed directive is accounting, and not taxation. It says nothing about the reporting threshold, data items or template. The letter only responds to the resolution calling on the NL government to support reporting per non-EU country separately.
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This is a very cautious approach based in the idea that value added in a nation ought to be the basis of tax. I doubt it is workable. It is better to have reported world wide revenues be the basis for taxation in every EU country in which the ‘parent’ company operates; this avoids the current ‘national winner takes all’ that has incentivized Luxembourg-Dublin-Off-shore meaning a couple of EU nations take a pittance by robbing the other EU nations of their fair share.