EU ‘too slow to act’ on tax transparency

Written by Martin Banks on 2 August 2019 in News
News

Former MEP Catherine Stihler says the EU has been “too slow to act” on the “urgent need” for greater tax transparency.

Photo credit: Adobe Stock


The ex-Labour member said the failure to update the international tax system has allowed businesses to move their profits and intellectual property around the world, often to locations where they pay the least tax.

Earlier this week it was reported that the makers of video game Grand Theft Auto have paid no UK corporation tax in ten years.

It is claimed that Rockstar North, the Edinburgh-based developer of the game, has at the same time made billions in revenue for its parent company Take-Two Interactive.


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A report from the investigative think tank TaxWatch UK said that the UK government should urgently examine the allocation of tax relief for the games industry, though it also states that Rockstar and Take-Two’s allocation of profits is entirely legal.

While tech giants such as Google, Amazon and Facebook are said to be some of the most high-profile examples of companies using complicated tax structuring, the problem is systemic.

Last week, a leak revealed how multinational companies have used Mauritius to avoid taxes in countries in Africa, Asia, the Middle East and the Americas.

Two years after the EU voted in favour of publishing public country-by-country reporting information as open data for all large corporations operating in Europe, the issue remains stuck in discussions at the Council.

“We need greater transparency measures to shine a light on the practices currently being used by multinational corporations in order to crack down on abuses as exposed by investigations such as the Panama Papers and the Mauritius leaks” Catherine Stihler, CEO of Open Knowledge Foundation

The Open Knowledge Foundation, now headed by Stihler, is pushing for a variety of measures known as the ABCs of tax transparency.

‘A’ stands for automatic exchange of information where countries can more easily share tax data on individuals or businesses; ‘B’ is for beneficial ownership where the issue of opaque company ownership is addressed by publishing public registers of who owns or runs companies and trusts.

‘C’ means country-by-country reporting where corporations would be required to publish details about the tax they pay, people they employ and profits they make in each country where they operate, to build up a better picture of their activities.

Stihler, chief executive of the UK-based foundation, told this website, “The international tax system is broken and in need of urgent updating. We need greater transparency measures to shine a light on the practices currently being used by multinational corporations in order to crack down on abuses as exposed by investigations such as the Panama Papers and the Mauritius leaks.”

“A lack of transparency in current country-by-country reporting standards will fail to build confidence in the treatment of corporations.”

The former Scottish deputy added, “The EU is acting too slowly when it comes to this vital issue. Incoming European Commission President Ursula von der Leyen and policymakers across the EU need to prioritise tax transparency as an essential strand of modernising the global taxation system to improve public trust and ensure corporate compliance.”

In Europe, the banking industry is the only sector which is required to publicly report its profits and tax on a country-by-country basis.

This is a result of regulation following the financial crisis in 2008. Since 2015 all banks based in the European Union have been obliged to report on their operations in this way.

The European Commission, meanwhile, has recommended major new steps aimed at combatting money laundering in the EU.

The EU executive suggests a more harmonised AML (anti-money laundering) rulebook by replacing the EU Anti-money laundering Directive by a directly applicable Regulation; an EU Financial Intelligence Unit (FIU) coordinating the work of national FIUs and an entirely new EU body in charge of AML supervision.

German MEP Sven Giegold, economic and financial spokesperson of Greens/EFA, welcomed the move, telling The Parliament Magazine, “This is summer music in my ears. This package brings great progress in the fight against dirty money in Europe. Effective money laundering controls are critical in the fight against organised crime.”

About the author

Martin Banks is a senior reporter at The Parliament Magazine

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