Tax transparency - New EU rules for companies from 2023

Large corporations in the European Union are expected to have to make public how much taxes they pay in each state from 2023. Proponents hope that these new rules, on which representatives of the EU institutions have now agreed after five years of dispute, will be a real step forward against the clever tax-saving models of some companies. But how much this public "country-by-country reporting" really brings is controversial.

In the EU, Portugal, which is currently chairing the 27 states, tied the knot for the project that has been debated since 2016. First the country organized a majority in the EU Council of Ministers - incidentally without Germany, where the finance and economics ministries are not in agreement. And on Tuesday evening, Portugal also managed to reach an agreement with representatives of the European Parliament.

Economy Minister Pedro Siza Vieira then recalled the two main arguments for the new rules: According to estimates, the EU states lose more than 50 billion euros a year through tax avoidance by large companies. And right now, after the serious pandemic crisis, it is our duty to ensure that all economic actors do their fair share of the economic recovery. "

Change affects major international players

The recipe is now: Multinational companies with sales of more than 750 million euros worldwide must not only give the tax authorities an insight, but also the public. In a country-specific report, they should publish, among other things, the net sales, profit before taxes and the income taxes actually paid. The number of employees and subsidiaries should also be made transparent. The data should be broken down for all EU states, as well as for the states on the "black" and the "gray" EU list of tax havens.

That would give an insight into how tax-saving models work. Some large companies use offshoots and complex corporate networks to shift profits to countries with the lowest possible tax rates and thus avoid taxes. This happens within the EU, but also worldwide.

This is where the critics hook. The organization Transparency International, for example, complains that the new EU requirements do not apply worldwide, but only for EU countries and the tax havens designated by the EU. That leaves too many loopholes and ultimately renders public country-by-country reporting toothless. The development organization Oxfam argues similarly. The tenor is: finally take the economy tougher.

"Blow for business location"

The Federation of German Industries argues from the opposite direction. The agreement on the "public disclosure of sensitive company data is a hard blow for Europe as a business location," said BDI Managing Director Joachim Lang on Wednesday. Now there was a threat of considerable competitive disadvantages. Because insights into business and tax data allow conclusions to be drawn about cost structures, pricing policy and profit margins.

According to earlier information from the BDI, 1.200 German companies are affected. Appeals by the association to the federal government to prevent the disaster, however, were unsuccessful. In the absence of agreement, Germany abstained from the Council of Ministers in the spring.

The agreement reached by negotiators from the EU institutions has yet to be formally confirmed by them. Only then can they come into force and be implemented within 18 months. (apa / dpa)