Ireland’s Minister of State for Trade Promotion, Digital and Company Regulation, Robert Troy TD, has been advised to maintain a “principled opposition” to refreshed efforts in the EU to introduce greater tax transparency for multinationals.
A briefing by officials in the Department of Enterprise, Trade and Employment to the Minister of State, seen by the Irish Times, strongly recommended that Troy makes an intervention to oppose the proposed tax changes, with officials pointing to implications for Ireland’s competitiveness and ability to attract FDI.
The European Commission first launched plans to introduce country-by-country reporting proposals back in 2016 in the wake of the ‘Luxembourg Leaks’ financial scandal of 2014, which uncovered sweetheart tax deals to multinationals and sparked wider international investigations.
The 2015 and 2016 Commission packages contained tax transparency announcements, including further transparency requirements for companies, such as the public disclosure of certain tax information by multinationals.
Country-by-country reporting essentially means that multinationals with a total consolidated group revenue of at least €750 million would be required to publicly report on how much tax they pay and where they pay it.
The European Parliament voted on the proposal and passed the file to the EU Council of Ministers in July 2017. Since then, it has remained stuck.
A core group of member states, including Germany, the Netherlands, Sweden, and Ireland have stood opposed to the introduction and essentially stalled its introduction into law.
However, in early 2021, Portugal’s Presidency of the Council of the European Union won broad support from EU countries to move forward with the directive.
On 25 February, an informal video conference of internal market and industry ministers had a public exchange of views on how to take the proposed directive forward.
Following the meeting. Pedro Siza Vieira, Portuguese Minister of State for the Economy and Digital Transition said: “Tax transparency is a fundamental principle in any democratic society. It enables policy makers to take informed decisions and to ensure that all economic actors contribute in a fair and equitable manner to the economy of the various countries where they conduct their business. Today’s debate has opened the way for the proposed directive to move forward as a matter of priority.”
A majority of ministers invited the Portuguese presidency to seek a negotiating mandate with the European Parliament to explore the possibility of a deal for the adoption of the directive.
On 8 March 2021, the JURI-ECON committees’ decision to enter into interinstitutional negotiations was announced in plenary (Rule 72).
The Irish Government’s opposition is founded in the belief that tax ministers, rather than competition ministers, who deal with internal market rules, should handle the measure. The progress of the proposal through the EU’s competitiveness council, which is made up of national EU trade and enterprise ministers, means that the law only required a qualified majority to pass. Approval by finance ministers, however, would require unanimous support and effectively grant those member states opposed to the change a veto.
“Tax transparency is a fundamental principle in any democratic society. It enables policy makers to take informed decisions and to ensure that all economic actors contribute in a fair and equitable manner to the economy of the various countries where they conduct their business.”
Speaking during the public session discussion, Minister of State for Trade Promotion, Digital and Company Regulation, Robert Troy TD, said that while the Irish Government supports transparency and good governance, they would prefer to see the measure developed with tax expertise. “Tax experts are best placed to ensure that international efforts to collect income tax from multinational corporations will not be undermined by new measures,” he stated.
According to the Irish Times, the brief sent by departmental officials to Minister Troy also flagged a potential conflict between his opposition to the change while it is being supported by Ireland’s EU Commissioner Mairead McGuinness.
The Commission requires its commissioners to represent the whole of the EU when in the joint executive, not national positions.
McGuinness has previously outlined her belief that country-by-country reporting will happen. The Commissioner leads the Financial Stability, Financial Services and Capital Markets Union portfolio, meaning that she will be responsible for bringing into force the taxation proposal.
The Portuguese Minister of State for the Economy and Digital Transition, Siza Vieira, has expressed his hope that “trialogue” talks between EU member states, the European Parliament and the European Commission could see an agreement found before June.