Just two weeks ago, a resolution on country-by-country reporting at the EU Competitiveness Council missed the qualified majority needed by just one vote. Among those who voted against the resolution was Austria’s Minister of Economic Affairs, Elisabeth Udolf-Strobl. But only a few days later the Austrian Parliament committed to ending its long-standing opposition and promised “to prevent further delay” in moving proposals forward in the EU.
The move was made possible by the fact that Austria’s interim government does not have a stable majority in Parliament. After the so-called Ibiza affair scandal hit the right-wing Freedom Party, and instability subsequently engulfed the conservative government, there is now a free play of competing forces in parliament with the Peoples Party and Greens scrambling to form a new government. The Social Democrats have taken advantage of this to advance public country-by-country reporting by using the votes of the Greens and the Freedom Party to push through a motion obliging the current and future governments to vote for tax transparency at the European level. This should clear the way for final negotiations between governments, the European Commission and the EU Parliament.
The resolution comes after a vigorous and sustained advocacy campaign by Attac, the Vienna Institute for International Dialogue and Cooperation, KOO and others. It marks a sea change from the pattern of recent years, which saw civil society demands consistently rejected by finance ministers from the People’s Party in favour of corporate interests.
Meaningful European leadership on the issue of public country-by-country reporting has the potential to deliver a dramatic blow to the current environment of secrecy and abuse in the tax practices of multinational corporations. Effective and transparent country-by-country reporting would oblige companies to publish how much profit they declare in each country and how much tax they pay on it. It is well-documented that such public reporting is essential to curbing tax avoidance by multinational corporations, which is in turn critical to stem the hemorrhage of revenue from developing countries.
The triumph in Austria is just the latest development in the battle for full and meaningful public country-by-country reporting, which has been running for some time. The EU Commission presented a proposal on the issue back in 2016, but this is limited to corporations’ subsidiaries in EU states and to blacklisted ‘tax havens’. It also excludes a number of important accounting elements from country-by-country reporting reports, such as sales and purchases, asset values, stated capital, public subsidies, and the full listing of subsidiaries.
Following scrutiny of the Commission proposal, the European Council delivered a legal opinion calling for a change in its legal basis that would make it a tax file rather than an accounting file. This would in turn diminish the participation of the European Parliament, which is in favour of more rigorous standards, to a consulting role only. While the Legal Affairs Committee of the European Parliament has argued for keeping the current legal basis, the Parliament has since weakened its position by introducing a loophole which would allow corporations to keep information secret if they believe it to be ‘commercially sensitive’. It has stuck to its guns in demanding that multinationals report on their activities in all countries, however.
While the legal wrangling between the European Commission and the more democratic Parliament is sure to continue, this victory in the Austrian Parliament should translate into an important shift in the balance of powers at those negotiations in the months ahead. Public country-by-country reporting, at the EU level at least, is now within our grasp.