States approve tougher corporate tax rules

Large corporations in the European Union will soon have to make public how much taxes they pay in each state. EU governments today approved a controversial law aimed at disclosing corporate tax-saving models. EU institutions agreed on the new rules for country-by-country reporting in June after a five-year dispute.

The Council of Ministers has now approved this compromise and paves the way for a final decision by Parliament, which is considered a formality. The law must then be implemented by the member states within 18 months – probably by mid-2023.

Large corporations committed to greater transparency

According to the regulation, multinational companies with a worldwide turnover of more than 750 million euros must not only give the tax offices but also the public an insight into their books. This applies to both European and international companies based in the EU.

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 countries, as well as for the countries on the EU list for tax havens.

This should give an insight into how tax saving models work. Some companies push their profits to countries with the lowest possible tax rates, even though they were not achieved there, in order to save taxes. This happens within the EU, but also worldwide. Sweden and Cyprus voted against the scheme, and Member States such as Luxembourg and Ireland, known for their low taxes, abstained from voting.

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