This is an archive article published on April 13, 2016

Panama Papers: EU to force multi-national companies to report earnings, raise accountability

Rules to target firms that do business in territories that disregard good standards on taxation

3 min readStrasbourgApr 13, 2016 04:46 AM IST First published on: Apr 13, 2016 at 04:01 AM IST

Activists take part in a demonstration outside the European Commission (EC) headquarters ahead of statements by the EC on the effectiveness of existing measures against tax evasion and money-laundering in light of the recent Panama Paper revelations, in Brussels, Belgium, April 12, 2016. REUTERS/Yves Herman TPX IMAGES OF THE DAY

The EU unveiled plans Tuesday to force the world’s biggest multinationals to fully report earnings and pay their fair share of taxes, saying the Panama Papers scandal added to the need for change.

The European Commission, the EU’s executive arm, said under the new rules big companies operating in Europe would have to make public what they earn in each member state of the 28-nation bloc.

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Country-by-country reporting has for years been a major demand of tax activists who accuse big corporations of secretly shifting profits from major markets to low tax jurisdictions, often through the use of shell companies such as those exposed in the Panama Papers leaks.

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“The Panama Papers have not changed our agenda but strengthen our determination to make sure taxes are paid where profits are generated,” said Jonathan Hill, EU Financial Services Commissioner

He presented proposals Tuesday that would force companies that have over 750 million euros ($850 million) in global revenues and do business in the 28-country EU to publish how much income tax they pay in each member state and how much they pay on outside-EU business.

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Hill said the rules would specifically target companies that do business in nations or territories that disregard good governance standards on taxation.

“So if large multinationals active in Europe are paying tax somewhere like Panama, to take one example, they would need to make that public,” Hill said, taking a swipe at the Central American nation already at the heart of the latest tax avoidance scandal. The EU estimates it loses up to $80 billion in revenue every year because of tax avoidance.

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The Commission says it would affect some 6,000 companies but socialist legislators estimated it would affect less than 2,000.“This proposal is a simple, proportionate way to increase large multinationals’ accountability on tax matters without damaging their competitiveness,” the Commission said in a statement.

Meanwhile, Panamanian prosecutors visited the offices of the Mossack Fonseca law firm to look into its allegations that a computer hacker was behind the leak of a trove of financial documents about tax havens the firm set up to benefit influential people around the globe.

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Public ministry spokeswoman Sandra Sotillo said the visit to the offices of Mossack Fonseca Monday was made by investigators from the intellectual property prosecutor’s office. Fonseca has maintained that the only crime which can be taken from the leak was the computer hack itself.