July 4, 2017
By Aurore Chardonnet & Nina Monjean
It is not often the European Parliament can make a difference when it comes to economic inequality. Today, Members of the European Parliament (MEPs) have a chance to do so. They can either stand up for their citizens, or allow tax havens and big business to continue to get away with dishonest tax practices to the tune of billions of euros, at society’s expense.
A proposed EU law could require companies to publicly report how much profit they make, where they make it, and if it is taxed accordingly. That in turn means citizens can hold companies to account for avoiding paying taxes, and hold governments to account for allowing it. But a huge loophole that MEPs will also vote on today could exempt companies if they say that making their tax affairs public is against their commercial interests. In other words, companies would be allowed to refuse to report their activities, simply by deciding they don’t want to.
MEPs must limit that loophole in the vote on public country-by-country reporting, as the tax transparency measures are known.
Billions lost to corporate tax dodging around the world can lead to people lacking healthcare and education, particularly in developing countries losing out more than $100 billion a year. Scandals such as LuxLeaks and the Panama Papers have revealed the scale of the problem. People want change: 350,000 EU citizens publicly supported want laws to make companies declare their tax affairs – instead of only finding out about lost money when the next scandal is exposed.
Oxfam has proven the great use that can be made of such information by revealing how Europe’s biggest banks register billions of euros of profit in tax havens despite actually basing very little of their activity there. The ‘Opening the Vault’ report indeed showed the huge mismatch between where banks make their profit and where they pay tax. Exposing this would not have been possible without EU legislation on transparency for the financial sector.
The current proposals could extend such crucial legislation to all large companies, not just those in the financial sector. But only if the massive loophole is closed the new law will have real impact.
Large multinationals are doing everything to block the reforms. In this tug of war between citizens and large companies, where will MEPs put their strength – on the side of ordinary people in Europe and around the world or on the side of the wealthy few trying to avoid paying their fair share?