EU Proposes Multinationals Publish Profits Generated in Tax Havens

BRUSSELS—Large multinationals operating in the European Union will have to publish profits and tax bills generated in countries considered to be "tax havens," the bloc's executive arm said Tuesday as it toughened up proposals for fighting tax avoidance following the "Panama Papers" leak.

The European Commission had already been working on plans to open up to the public reports by thousands of companies on profits reaped and taxes paid in individual EU countries—an unprecedented move for a major jurisdiction.

But the EU reworked its proposals in recent days to also require public and more exhaustive reporting of companies' operations in tax havens, after newspapers around the world uncovered thousands of offshore accounts—allegedly held by officials, executives and celebrities—via documents leaked from Panamanian law firm Mossack Fonseca & Co.

"By adopting this proposal, Europe is demonstrating its leadership in the fight against tax avoidance," said Valdis Dombrovskis, vice president of the European Commission in charge of euro and social dialogue.

Tuesday's proposals show how the commission is accelerating efforts to snuff out large-scale corporate tax avoidance amid pressure from the public. A previous proposal that would require national tax authorities to share corporate reports on profits and taxes was only approved by EU finance ministers last month.

Under Tuesday's plans, companies operating in the EU whose annual revenue exceeds €750 million ($856 million) would have to publish the reports, which would include details on business operations, such as the number of employees and nature of activities in the different tax jurisdictions.

The EU is still drawing up its list of non-EU countries that don't meet international standards for good governance in taxation. For all other non-EU countries whose tax rules are deemed in line with the standards, companies would only have to publish an aggregate figure of profits in all those countries.

The EU has been cracking down on companies trying to dodge taxes following revelations in 2014 that many multinational companies struck sweetheart deals in countries such as Luxembourg that allowed them to pay little tax in the bloc. Corporate tax avoidance costs the bloc's member states between €50 billion and €70 billion a year in lost tax revenues, according to the EU.

"Our proposal to increase transparency will help make companies more accountable," said Jonathan Hill, the EU's financial chief.

Several large companies, including McDonald's Corp. and IKEA, have questioned plans to make the reports public, claiming that disclosing such commercially sensitive information would place them at a disadvantage compared with rivals operating elsewhere.

But transparency campaigners said the additional proposals still don't go far enough.

"The last minute addition of tax havens smacks of window dressing," said Elena Gaita, a corporate transparency policy officer at Transparency International, the global anticorruption group.

"This proposal cannot be called public country by country reporting, if it does not include most of the world," said Ms. Gaita.

The proposal will still have to be agreed by EU governments before becoming law, a process that could take months.

Write to Natalia Drozdiak at [e-mail]

(END) Dow Jones Newswires

April 12, 2016 09:25 ET (13:25 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.