EU Co-Legislators Reach Agreement on Public CBCR

On March 10, 2021, the European Union (EU) co-legislators announced that they had reached an agreement on a proposal to create a public country-by-country reporting (CBCR) system for multinational corporations (MNCs). The agreement was made between the European Parliament, the Council of the European Union, and the European Commission, and is expected to be finalized in the coming weeks.

The proposal requires MNCs with annual revenues of over €750 million to provide publicly available information on profits, taxes paid, and other relevant data for each country where they operate. The aim of this new regulation is to increase transparency in the tax practices of MNCs and to reduce tax avoidance. By making this information available to the public, the proposal aims to increase public scrutiny and pressure these companies to pay their fair share of taxes.

This proposal has been in the making for several years, with the European Parliament voting in favor of it in 2017. However, progress was slow due to opposition from some EU member states and certain MNCs. The COVID-19 pandemic and the resulting economic impact have highlighted the need for increased tax transparency and accountability, which has led to renewed efforts to push the proposal forward.

The new CBCR system is expected to be implemented by 2023. However, MNCs will have to start preparing for the reporting requirements well before then. The proposal requires MNCs to provide CBCR information for their financial year starting on or after January 1, 2022. This means that companies will have to start collecting and analyzing data from the beginning of 2022 in order to be ready to report in 2023.

The proposal has been welcomed by many civil society organizations, who have been advocating for greater tax transparency for years. They argue that this will help to level the playing field for small and medium-sized enterprises who are unable to engage in aggressive tax planning, and that it will help to fund crucial public services that have been underfunded for years.

Some MNCs have also welcomed the proposal, seeing it as an opportunity to demonstrate their commitment to transparency and responsible business practices. However, others have criticized the proposal, arguing that it will be costly and time-consuming to implement and that it could harm their competitiveness.

In conclusion, the EU co-legislators have reached an agreement on a proposal to create a public country-by-country reporting system for MNCs. The proposal aims to increase tax transparency and reduce tax avoidance by requiring MNCs to provide publicly available information on profits, taxes paid, and other relevant data for each country where they operate. The system will be implemented by 2023, with reporting requirements beginning in 2022. While the proposal has been welcomed by many, some MNCs have criticized it, highlighting the challenges they may face in implementing it. Nevertheless, it is clear that this proposal represents an important step towards greater tax transparency and accountability in Europe.