On 12 April 2016, the European Commission (EC) introduced a legislative proposal on public reporting requirements for large multinational enterprises (MNEs), being multinational groups with a consolidated turnover exceeding 750 million EUR. The so-called Country-by-Country Reporting (CbCR) will force large multinational enterprises to publish country specific profits and tax payments.
The current efforts for changes in the EU tax policy are directly linked to the OECD project on Base Erosion and Profit Shifting (BEPS). Among the 15 action points of BEPS, transparency plays a central role. Action point 13 - 'Transfer Pricing Documentation and Country-by-Country Reporting' - addresses the issue of more transparency explicitly. A first step by the EC refers to the so-called "Anti-Tax Avoidance Package".
In its Anti-Tax Avoidance Package, released in January 2016, the EC already indicated it was looking at the issue of public CbCR. The current legislative proposal to introduce public CbCR is published only a few weeks after the Council of the European Union reached political agreement on non-public CbCR to national tax authorities of the EU Member States. It is yet another EU initiative aimed at enhancing transparency and public scrutiny on corporate income tax affairs of MNEs.
CbCR is seen as a powerful tool to fight profit shifting by MNEs. They shall be obliged to provide financial figures such as the net turnover (including that with related parties), profit/loss before tax and number of employees as well as the nature of the enterprise's activity, the amount of accumulated earnings and the current year corporate income tax accrued and corporate income tax paid (differences between amounts of tax paid and tax accrued at group level must be explained). However, for legal reasons the CbCR will be limited to EU countries while for the rest of the world only aggregated figures will be provided.
The EC proposal goes further than OECD BEPS Action 13 requirements regarding the disclosure of information to tax authorities. This report must be published and made accessible on the corporate website in at least one of the official languages of the EU and filed with the appropriate business register.