Perhaps more clearly than ever, the current crisis has demonstrated how important it is for the European Union to become a community where the members show solidarity for each other. Solidarity is an essential ideological and moral foundation for the free market and free movement because if an alliance with such an extensive and diverse membership fails to fully internalize the concept of joint responsibility and interdependence, it may soon turn into an exploitative organization marred by infighting.
The other key moral pillars of cooperation must be transparency and social justice, without which every egalitarian system runs the risk of falling into chaos and disarray. Consequently, the European Union has made several decisions in the past decades to achieve the above goals. Today it is beyond question that EU citizens must enjoy the same rights and bear the same responsibilities in each EU Member State. Similarly, no citizen can be discriminated against if they live in another EU Member State than their country of citizenship. That’s why it’s so important to focus on the legislation to prevent double taxation, for example.
However, while the situation is quite clear for individual citizens, whose activities are relatively tangible in one or the other Member State, such a regulation has been sorely missing in the case of multinational corporations, which have had various means at hand to evade taxes to this day.
Portugal’s EU Presidency proposed a European public country-by-country reporting directive, which aims to require multinationals with an annual consolidated turnover above €750 million to publish information on where they make profits and pay taxes. This could be a major step forward.
As it was reported in the press on 25 February, the economic ministers of the EU countries gave broad support to the proposal which had originally been submitted by the European Commission back in 2016. This will pave the way for the Council, the European Commission and the European Parliament to start trilateral talks on finalizing the directive. If everything goes according to plan, the regulation may be born before June. According to experts, if corporations are required to publish where they make profits and pay taxes, it will mean a serious pushback for tax evasion tricks.
Of course, there are some Member States that are not particularly fond of this idea.
The list of opposers and abstainers includes Germany, Ireland, Luxembourg, Malta, Sweden, the Czech Republic, Cyprus and Hungary. Their motives are mostly clear: as a large economic power, Germany is the home of many affected multinational companies which Berlin always strives to protect, while Ireland, Malta, Luxembourg or Cyprus enjoy the benefits of the current system as tax havens. On the other hand, if you want to understand why Hungary opposed the plan so vehemently even though the country suffers heavy losses due to corporate profit shifting practices despite its pro-multi tax system, you should look for the reasons in politics rather than the economy.
Although I understand the motives of the Member States benefiting from the system, as a MEP I still believe that solidarity and social justice are incompatible with the practices of certain multinational corporations which take advantage of particular Member States while they avoid paying their dues or try to minimize them.
I am convinced that a socially just Europe cannot be built upon trickery.
If we rightfully expect our citizens to pay their taxes on their income in the country where they earned it, and not in another one where there may be more favourable conditions, I believe we can expect the same from multinational corporations that generate profit in Europe.
Experts say there’s plenty of room for improvement since as many as nine out of ten multinational corporations might not fall under the scope of the new regulation. However, I still believe it’s an important first step and hope that the EU presidencies of other countries that are in a similar position to Portugal, along with many European politicians, will do their best to eliminate the practices that cause damage to the Member States.