EU unveiling new tax rules for multinationals: 7 things you need to know
The EU is unveiling new rules around multinationals, their taxes and revenues. Here’s what you need to know:
1 What is the EU asking companies to do?
The EU wants multinationals to pay tax where they do business – and show it. That means revealing details on staff numbers, turnover, profits and tax bills for all of their subsidiaries in the EU, broken down country by country. The idea is to publish the information online in their annual reports.
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2 Which companies will be caught in the net?
Similar rules have been in place since last year for banks, extractive (oil, gas, mining) and logging companies, so today’s proposal will target retail, pharmaceutical, consumer and computer giants. The EU estimates that multinationals get away with paying 30% less tax than domestic companies, simply by exploiting differences in national tax rules, so the proposals will focus on the largest companies – according to draft proposals, those with an annual turnover of more than 750 million euros.
3 Why now?
A series of scandals in the UK, Luxembourg and, most recently, Panama, has revealed how companies exploit legal loopholes to squirrel profits offshore, out of sight of tax authorities. The revelations have prompted public outrage, especially as national budgets have been stretched so thin during the crisis, while ordinary taxpayers have been asked to stump up billions to rescue ailing banks. The EU estimates that 50-70 billion euros is lost each year to corporate tax avoidance, an amount equivalent to Ireland’s bank bailout bill.
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4 What is Ireland’s position?
Ireland has welcomed international standards published last year by the OECD, which introduced country by country reporting, but did not require companies to publish the information. The Government introduced the OECD rule in Budget 2016, meaning the information is shared only between tax authorities and not published online.
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5 When would the new rules come into force?
Probably not until 2019. They first need to be agreed by a majority of EU countries and European parliamentarians, which could take several months – especially as the proposals are controversial and likely to be challenged and amended. Once adopted at EU level, the government would have two years to bring the rules into law in Ireland.
6 Doesn’t Ireland have a veto on tax matters?
Not this time, as the changes concern the EU’s accounting directive, not the tax rules. That means only a majority of countries (and EU parliamentarians) need to agree.
7 Is this proposal linked with the Commission’s investigation into Apple?
No. Apple is being investigated under EU state aid rules to see if it benefitted unfairly from its previous tax agreements with the Irish Government. The case is still pending. The new rules will affect companies like Apple, however. At a hearing in the European Parliament last month, an Apple representative said the company was the “largest taxpayer in the world”, but refused to break down its EU and Irish tax bills. The new rules, if agreed, would force it to do so.
Article Source: http://tinyurl.com/kbwqb42