Members of the European Parliament (MEPs) grilled EU Finance Commissioner Mairead McGuinness on Thursday after they claimed a document sent by the bloc's executive urges EU countries to weaken their tax transparency requirements.
ADVERTISEMENTMcGuinness assured that the document, which provides EU capitals with technical guidelines on the so-called public country-by-country reporting Directive, aims to stop multinationals from benefiting from legal loopholes and in no way curbs member states’ ambition in clamping down on tax evasion.
But some MEPs believe the document is a covert attempt at limiting tax transparency.
"The guidance provided in the letter isn't technical guidance. This guidance has political influence, and this constitutes a transgression," said Evelyn Regner, Vice-President of the European Parliament for the Socialists and Democrats.
“The guidance clearly overshoots the mandate of the European Commission, and behind our back, the co-legislators,” she added.
Manon Aubry, an MEP for The Left said that "in the greatest secrecy, the Commission sends a note to member states asking them to apply minimum transparency rules. Who has given you this mandate?"
Two MEPs from the right-leaning EPP group came out in McGuinness’ support, defending the document as necessary to avoid legal fragmentation and warning against over-burdening corporates with transparency rules.
“It’s naive to think that if you make tax information public that then you collect more tax,” said German MEP Markus Ferber said.
“We need to strengthen cooperation between tax authorities. That’s what counts because they’re the ones that determine the tax burden and ensure companies are paying their fair share,” he added.
The tax transparency Directive entered into force in 2021 as part of the EU’s response to the 2016 Panama Papers scandal, which exposed how the super-rich benefited from secretive offshore tax regimes.
McGuinness, who voted for the Directive in 2021 when she was an MEP, said that the Commission’s intervention tackles the practice of ‘gold plating’, where governments add extra requirements and burdens when applying EU law, creating fragmentation between member states and negatively impacting the single market.
She also stated that gold plating could increase the risks of multinationals circumventing rules and structuring their business activities to take advantage of regulatory gaps.
“I also want to emphasise that informing member states of the drawbacks of gold plating does not mean prohibiting anything. Ultimately, member states can add reporting obligations as they see fit,” she said.
A group of MEPs responsible for drafting the Parliament's report on the tax transparency Directive in 2021 addressed a letter to the Commission Wednesday asking for clarity on the intervention.
McGuinness committed to providing a written reply to their questions.
The 2021 Directive requires big companies with revenues of more than €750 million to publicly disclose where they are paying tax, and includes a clause encouraging governments to introduce measures beyond the EU requirements.
But opponents say the law does not go far enough, as companies would only have to declare the taxes they pay in EU countries and in 16 countries on the so-called ‘black’ and ‘grey’ list of fiscal havens.
Only ten member states have transposed the bill into domestic law. The deadline for doing so passing was 22 June 2023.
Interference in tax transparency rules recently came into the global spotlight globally when an allegation emerged against the OECD for lobbying the Australian government to water down its tax transparency rules.