EU Parliament multinational transparency vote introduces ‘commercial confidentiality’ loophole

Yesterday the European Parliament held a crucial tax justice vote on making multinational companies with an annual net turnover of 750 million euros and above publicly report their activities, structures and tax payments on a country-by-country basis. That would mean no more secrecy around those things that affect the welfare of you, me and the rest of the world on a daily basis. It would mean the end of the outrageous secret deals done with governments behind closed doors. Each country would know how much tax a multinational company contributes to their Treasuries. As they say, sunlight is the best disinfectant.

At TJN we have fought a long campaign on this issue, joined by many friends in the tax justice movement. When TJN first floated this idea along with Richard Murphy it was laughed at. Now we’re moving closer and closer to it. But we’re not there yet.

You can read more on the benefits of public country-by-country reporting here. And here’s why this issue is so important:

So how did yesterday’s vote go? Well, the good news is that the European Parliament voted to support global tax transparency and efforts to put an end to the secrecy multinational companies have enjoyed for s long. It’s also good that MEPs rejected the European Commission’s proposal to exclude non-EU jurisdictions from this legislation. That would have meant developing countries wouldn’t have been able to take advantage of the same transparency, yet they suffer the most harm from corporate tax dodging since they’re more reliant on that revenue than wealthier countries with stronger domestic tax bases.

The bad news is that an amendment was tabled by the liberal ALDE group and supported by the centre-right EPP group (Conservatives and the Liberals) that introduces a significant loophole which could undermine the entire proposal. It provides nation states with the possibility to grant exclusions for multinationals which would allow them to avoid disclosing crucial information if it’s considered to be “commercially sensitive”. Yes, that old chestnut. This would give mutinationals a potential ‘get-out’ clause.

This last minute amendment “makes the text about as watertight as a sponge,” according to Elena Gaita of Transparency International EU. TJN’s John Christensen commented:

“For decades so-called ‘commercial sensitivity’ has been used as a pretext for hiding all sorts of shenanigans and dodgy deals with tax havens.  Economic liberals within the European Parliament are confusing genuine competition between companies on price and quality of service with false competition based on special tax treatments and rent-seeking behaviour.”

It’s clear to us that there is no justification for commercial secrecy to override transparency and the public interest. We hope that nation states won’t be deciding to exempt multinationals from these transparency measures, but we’d rather not be leaving that just as a hope. There is a further vote whereby Members of the European Parliament can put this right. More on that below.

After the vote result was known Tove Maria Ryding, Tax Coordinator at Eurodad, the European Network on Debt and Development said:

“Until now, the European Parliament has been in favour of letting the public know what multinational corporations pay in taxes and where they do business. But tonight, at the expense of the rest of society, the Liberals and Conservatives decided to protect large multinational tax cheats by introducing a loophole, through which they can continue dodging taxes.

Public country by country reporting would be an important step towards ensuring that multinational corporations pay their share of taxes – both in Europe and in the world’s poorest countries. Failing to stop large-scale corporate tax dodging doesn’t only mean that we lose funding for public services around the world. It also disadvantages all the small and medium enterprises, which struggle to compete with large multinational corporations that are not paying taxes.

We call on the European parliamentarians to fix the loophole in this important piece of legislation, when the issue comes to a vote in the plenary.”

Anyway, all is not lost. MEPs failed to get the two thirds majority needed to be able to start negotiations with the Member States and the European Commission. What will happen now is that this will be sent to the European Parliament plenary for final adoption. We don’t know the date for that vote yet. It won’t be easy to get this turned around in plenary, but – this is not adopted finally yet.

In the meantime an accelerated campaign is needed from the public to pressure MEPs and leave them in no doubt that full, public country-by-country reporting is what voters want. They must not fail to uphold the public interest in favour of ‘commercial secrecy’. You can add your voice to the campaign by our friends at Eurodad here.

Here’s that multinational ‘escape hatch’ amendment:

1. In order to protect commercially sensitive information and to ensure fair competition, Member states may allow, that one or more specific information listed in Article 48c of this directive, be temporarily omitted as regards activities in one or more specific tax jurisdictions when its nature is such that it would be seriously prejudicial to the commercial position of the undertakings referred to in Article 48b (1) and Article 48b (3) to which it relates. The omission shall not prevent a fair and balanced understanding of the tax position of the undertaking. The omission shall be indicated in the report together with an explanation as to why this is the case and with a reference to the tax jurisdiction concerned.
2. Member states shall make such omissions subject to prior authorisation of the national competent authority. Every year, the undertaking shall require a new authorization by the competent authority based on a new assessment of the request. As soon as the information fails to comply the requirement laid down in paragraph 4, it shall be immediately made publicly available.
3. Members States shall notify the European Commission when granting such a temporary derogation and shall transfer in a confidential way the omitted information with the detailed explanations of the granted omission. On a yearly basis, the European Commission shall make accessible on its website the notifications received and the explanations given in paragraph 4 of this Article.
4. The Commission shall verify that the requirement is duly respected and shall monitor the use of such a temporary derogation authorised by national authorities.
5. In case the Commission, after its assessment on the received information according to paragraph 5 decides that the requirements of paragraph 4 are not fulfilled, the undertaking shall immediately make the information publicly available.
6. The Commission shall, by means of a delegated act, adopt guidelines to assist Member States defining cases where the publication of information shall be considered seriously prejudicial to the commercial position of the undertakings to which it relates.