We need to make country-by country reporting public.
Tax justice is becoming an increasingly foremost theme of crisis bailouts during the Coronavirus pandemic. The current crisis is showing all the flaws of a system designed not to guarantee maximum transparency but to hide the most basic information from citizens with the excuse of ‘confidentiality’. If for some of these problems a profound reform of the European Union is required, for others the solutions are simpler and more immediate. There is no lack of tools, there is a lack of will. A first straightforward step towards greater transparency would be to make the country-by-country reporting (CbCR) public.
What is country-by-country reporting (CbCR)?
For each country in which it operates, a multinational shares information such as turnover, profits, how many taxes have been paid, how many employees it has, and how much capital is invested. However, today only financial institutions are required to make this reporting public. Multinationals are obliged to communicate the information contained in this report only to the Revenue Agency — but not to make them public. The only remaining opposition to this most elementary transparency measure comes of course from multinationals and industry groups that benefit from opacity. But there is also a clear political responsibility if this path has not been followed.
The EU Commission presented a proposal on the issue back in 2016, but it excluded a number of important accounting elements from country-by-country reporting; such as sales and purchases, asset values, stated capital, public subsidies, and the full listing of subsidiaries. The European Parliament has since then weakened its position by introducing an easy way out which would allow corporations to keep information secret if they believe they are “commercially sensitive.”
In November 2019, a resolution on country-by-country reporting at the EU Competitiveness Council missed the qualified majority needed by just one vote. Cyprus, the Czech Republic, Estonia, Hungary, Ireland, Latvia, Luxembourg, Malta, Slovenia and Sweden considered that the Competitiveness Council was “not the appropriate Council configuration for adopting a general approach on the proposal.” Since then, nothing has changed.
The Fiat-Chrysler Automobiles case.
Fiat-Chrysler’s called for state support from the Italian government in response to the Coronavirus crisis. On May 16, Fiat applied for a state guarantee to cover a €6.3 billion loan which has triggered howls of complaint from the public, pointing out that the car maker isn’t an Italian tax resident. The company indeed officially fled from Italy six years ago, when Fiat became Fiat Chrysler Automobiles (FCA), and moved its headquarters from Turin to Amsterdam. The loan the group has requested to the Italian government would allegedly allow FCA’s parent company to save cash and pay a €5.5 billion dividend that is due to shareholders before the closing of the planned merger with France’s PSA Groupe (the owner of brands like Peugeot, Citroën and Opel).
Even if FCA’s parent company has sufficient liquidity to help its Italian subsidiary restart production, it prefers to keep it in its coffers. So, given FCA’s complex corporate structure, aid from Rome would ultimately support the whole group, which pays taxes in several European countries, including Luxembourg, the United Kingdom and the Netherlands.
Italian citizens should be able to know “whether the company moved its tax domicile to the U.K. to obtain a tax advantage, but the only way to get that information would be to publish country-by-country reporting that is not public,” said Tommaso Faccio, the head of secretariat at the Independent Commission for the Reform of International Corporate Taxation (ICRICT). Even the Minister for Southern Italy and Territorial Cohesion, Giuseppe Provenzano, publicly said it would be “an act of transparency and civic sense for FCA to spontaneously share its country-by-country reporting with the Italian government.”
A call for transparency.
With the publication of the country-by country reporting there would be greater transparency for citizens, but also for investors. It would be a matter of bringing greater confidence in the system and in the public institutions. The most common objection against those who ask a public country-by-country reporting of multinationals is that it contains trade secrets — the disclosure of which would lead to a consequent loss of competitiveness of the company. However, there is no empirical evidence supporting this thesis and some companies spontaneously make their reports public. A strong and firm European leadership on the issue of public country-by-country reporting could fix the current environment of secrecy and abuse in the tax practices of multinational corporations.
In 2016 DiEM25 launched the “Transparency in Europe now!” petition in order to demand the EU to be transparent and accountable to the people it serves, collecting thousands of signatures. In recent years, nothing has been done to address the problem of lack of transparency in Europe. For this reason, introducing transparent government across the continent remains one of the eight pillars of DiEM25’s Progressive Agenda for Europe. As part of DiEM25’s call for transparency, the movement has recently published Euroleaks, which reveals how important decisions that affect all our lives are taken — in our name — behind closed door.
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