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EU cracks down on tax havens, targets big companies

STRASBOURG: The EU unveiled plans Tuesday to force the world’s biggest multinationals to faithfully 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.

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.

“The Panama Papers have not changed our agenda but strengthen our determination to make sure taxes are paid where profits are generated,” EU Financial Services Commissioner Jonathan Hill told a news briefing at the European Parliament in Strasbourg, France.

Hill is a longtime political ally of British Prime Minister David Cameron who is one of many world leaders to have been caught up in the Panama scandal for ties to off-shore accounts.

Longstanding criticism of corporate tax policy blew up into the open with the Lux Leaks scandal in 2014, which exposed secret sweetheart tax deals given to huge corporations — including the likes of IKEA and Pepsi — by the small duchy of Luxembourg.

These companies are accused of recycling earnings from across the globe back through Luxembourg or other havens where authorities secretly allow them effective tax rates as low as 2pc.

The commission said corporate tax avoidance in Europe cost an estimated 50 to 70 billion a year in lost government revenues.

“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.

The EU plan closely follows recommendations from the OECD agreed by G20 leaders last year. They would apply to all global companies with sales worth 750 million euros or above worldwide and with activities in the EU.