The European Parliament has voted on enhancing the transparency of tax payments made by multinationals in different countries. A broad majority of MEPs[1] introduced public, country by country reporting (CBCR), obliging companies with a revenue of 750 million € to disclose information on their profits, turnover, taxes, number of employees, and other relevant financial information in all countries where they operate. However, a “loophole amendment” was introduced, which would absolve companies from CBCR if there are concerns of revealing “sensitive information”…

The issue

The public outcry after the release of Luxleaks, Swissleaks, Bahama Leaks and the Panama Papers has put tax avoidance and tax evasion firmly on the political agenda, and rightfully so. The European member states miss out on 50 to 70 billion € in tax revenue[2] as a consequences of profit shifting by large multinational companies. Many of these companies span continents, and Europe is not the only continent suffering the consequences of such aggressive tax planning.

African countries remain principally resource providers in the global supply chains for a wide array of industries:  raw materials, oil, forest, fish and agricultural commodities. African states could equally benefit from enhanced transparency from multinationals:  African countries are deprived of 50 to 80 million dollars annually as a consequence of illicit financial flows (IFF)[3]. These IFF include aggressive tax avoidance and tax evasion, abusive transfer pricing, trade mis-invoicing, unfair contracts amongst others. The main culprits as identified by UNECA are large multinational companies.[4]

In this respect, the European Parliament’s decision to have a global scope for the proposed directive is positive. Companies are thus required to report on their activities beyond EU-borders, which in principle could contribute to enhancing access to information for third country tax administrations. This, in turn, increases the potential to improve tax bases in developing countries that suffer greatly from tax base erosion impacting development negatively. This is a step forward from the Commission’s proposal which was limited to the 28 EU Member States and to a – yet to be agreed upon- list of tax havens. However, the Parliament’s text will likely meet opposition from the European Member States, several of which are in favour of weaker transparency requirements.

Another positive point in the text voted by the European Parliament concerns the public character of the CBCR rather than limiting the exchange of data between different tax administrations. After the above-mentioned scandals, citizens are demanding more access to information and public scrutiny. Currently the text stipulates that the companies should make this information available on their websites, which would give giving citizens the opportunity to examine tax data.[5]

Unclosing the loop

However, a loophole was created in the text that would allow companies to be absolved from publishing data if it would concern “commercially sensitive” information. While the text, though, does not provide a clear definition of what would be commercially sensitive information, it does stipulate that member state authorities would be in charge of granting such exemptions. So, it will be crucial how different member states define “commercially sensitive” and which exemptions they will grant and to whom. [6] This creates the risk of non-harmonized practices across member states and a possible race to the bottom in terms of transparency rules with companies favouring member states that have a broader definition of “commercially sensitive” information. The Commission is required to publish an overview on a yearly basis showing the firms granted such exemptions as well as the reasons for granting them.

The proposed limits to this exemption seem insufficient. Although the exemption is limited in time and needs to be renewed yearly, a company can do so indefinitely. Furthermore, at the end of the non-disclosure period firms would have to publish the information retroactively but only by means of an average over several years which obscures financial data, as they cannot be attributed to a specific fiscal year[7].  The lack of clear definition and the weak safeguards surrounding the exemption do risk the exemption being abused by multinationals to continue hiding profits in tax havens or not paying their due share of taxes, which would undermine the whole set-up of the Directive.


The adoption of a directive requiring multinationals, which operate in Europe and beyond to publish data on a country by country basis, is surely a positive step. Enhanced transparency rules already exist for the banking sector and partially for the extractive and logging industries. This directive does extend such obligations to more companies. The declaration of profits or losses on a country by country basis would allow tax authorities to determine whether the company in question is using aggressive tax planning to shift profits to a low tax jurisdiction. However, the loophole created in the text risks undermining the main objective of the whole legislation. Only the future will tell to what extent this loophole is being exploited as member states are obliged to report exemptions to the EC who will publicly list them. The discussions will now move on the table of the Council of Ministers, where the text will likely meet some resistance.


[1] Result of the vote : 534 votes in favour to 98 votes against, with 62 abstentions. European Parliament, Press Release : “Multinationals should disclose tax information in each country they operate”, 29 June 2017, retrieved at:

[2] Ibid.

[3] United Nations Economic Commission for Africa (UNECA), Report of the High Level Panel on Illicit Financial Flows from Africa, 2015, “Illicit Financial Flows”, to be consulted:

Global Financial Integrity, 2016 , to be consulted,

[4] Uneca, ibid.

[5] European Parliament, loc. Cit.

[6] Euractiv, “MEPs pass new rules to tackle multinationals’ tax avoidance”, July 4 2017, consulted at:

[7] European Parliament, loc. cit. / CNCD, “Transparence Fiscale des multinationales : le Parlement européen adopte un texte passoire”, consulted at