Home » News & Speeches » ICC responds to the European Commission’s latest proposal for public disclosure of tax data

The International Chamber of Commerce (ICC) has highlighted a number of potential concerns regarding new European Commission’s proposals that would require multinational companies to publicly disclose their earnings and tax bills in the European Union.

The latest version of the Commission’s proposal on country-by-country (CbC) reporting would require large companies to publish tax data for every EU jurisdiction in which they operate, together with an aggregated breakdown for their operations in other countries throughout the world.

This week’s proposal include a last-minute addition requiring corporations to disclose tax data in jurisdictions deemed as “tax havens” – despite their being no consensus within the  EU states on what constitutes a tax haven at the current time. The proposal also breaks new ground in relation to CbC reporting standards by stipulating seven data points that will be put into public registers, broken down by country: taxes paid, taxes due, pre-tax profit, revenue, number of employees, business profile and accumulated earnings.

Calls for consistency

In the wake of the Panama papers revelations last week, public debates have focused on the importance of international cooperation to limit tax avoidance. The Panama papers have led to the insight, that especially individuals – not MNEs – have made use of the possibility of intransparent economic activities. ICC therefore  urges policymakers not to lose sight of the great strides already taken to establish global standards to protect the integrity of the international tax system – including new tax transparency measures related to the automatic exchange of financial account information between national tax offices.

In this context, ICC recognizes the role of CbC reporting as a high-level risk assessment tool to ensure businesses pay the correct amount of tax – in line with the international guidelines set out in the Organisation for Economic Co-operation and Development (OECD)’s Base Erosion Profit Shifting (BEPS) project. The disclosure of company data to competent tax authorities, as set out in BEPS Action Item 13, is recognised an important instrument to help tax authorities improve their ability to fulfil their task in assessing the tax liabilities of their taxpayers – with the explicit provision that this information remains confidential.

As it stands, the EC proposal risks exposing commercially sensitive information that would place companies operating within the EU at a competitive disadvantage for global investment, without any additional benefit to public finances.

ICC has highlighted its concern that going beyond the scope of existing international guidelines, by making this information publicly available, could result in severe consequences for EU companies.

Christian Kaeser, Global Head of Tax at Siemens and Chairman of the ICC Commission on Taxation said: “As it stands, the EC proposal risks exposing commercially sensitive information that would place companies operating within the EU at a competitive disadvantage for global investment, without any additional benefit to public finances.”

Concerns for cross-border trade

ICC remains concerned about the broader economic impact of this proposal and fears that the diverging measures could hamper global efforts to establish a consistent international landscape. This could have knock-on effects for international trade and businesses of all sizes. There are also significant questions about the cost impact of the new proposals and the potential for such measures to inadvertently undermine the relationship between tax administrations and tax  payers.

“Business acknowledges the Commission’s aim to improve the functioning of the Internal Market and uniformly implement the BEPS Action Plan within the EU, but strongly recommends that the Commission aligns its proposed measures with already existing guidelines that would facilitate greater consistency internationally and incentivise cross-border trade, investment and economic growth,” said Mr Kaeser.

The aforementioned proposals will need to be approved by EU member states and the European Parliament, by a qualified majority vote, before they can be adopted into law. ICC therefore urges national governments to seriously consider the implications of these proposals before making any concrete decisions.

Learn more about the ICC Commission on Taxation.

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