8 Feb 2016 11:00am

New legislation to force multinationals to disclose tax information

New EU legislation will force multinationals to disclose their profits and tax bills in Europe, according to reports

Under new legislation being drafted by the European Commission (EC), US companies such as Google and Facebook will be obliged to make their accounts and tax arrangements public in every country they operate in in Europe.

EU officials familiar with the plan told the Guardian the proposals follow impact assessment work and are likely to be announced by April.

The source said the assessment had “really swayed opinion” within the EU commission in favour of making the accounts public.

John Christensen, executive director of Tax Justice Network, also told the paper, “For a very long time big companies have been saying their tax affairs are a matter of competitive confidentiality.

“We think it is incredibly important as a matter of principle that this information is made public,” he said.

The plans follow a set of proposed legislation to tackle tax avoidance among multinationals.

In December, the EC recommended a new transparency directive aimed at preventing corporate tax avoidance. Member states will be required to automatically exchange information on advance cross-border tax rulings as well as advance pricing arrangements.

A number of companies have come under fire by the EC for their tax arrangements with many shifting taxable profits towards states with more advantageous tax regimes or eroding the tax base.

This month, the government announced it has made a deal with Google, where it ordered the internet giant to pay £130m back in tax covering a 10 year period.

The Reuters news agency has calculated, based on Google's filings over the period, that around £24bn revenues in UK would have generated a tax bill of almost £2bn.

Following the deal, the Treasury Select Committee launched an inquiry into the UK’s corporate taxation system and the European Commission has also said it is willing to investigate the deal should they receive a complaint.

The Diverted Profits Tax, or ‘Google Tax’, a 25% tax on profits generated on multinationals from economic activity in the UK and shifted overseas through complex structures, will be introduced in April. The chancellor said it will raise £1bn over the next five years.

Jessica Fino

Related articles

EU adopts new transparency rules

EU tax committee extended

Treasury Select Committee to review UK tax system

PAC summons Google over tax deal