Following the U.S.’s desire to quash tax avoidance, the European Union is considering forcing large companies to reveal the amount of taxes they pay in each country — a move opposed by businesses worried by further bureaucratic overhead.
Speaking in Amsterdam, Michel Barnier, who oversees business regulation for the EU, said they would take existing rules for banks and make them applicable elsewhere. “We will expand these reporting obligations to large companies and groups,” he said.
Banks are currently required to report holdings in each country they operate, as the EU seeks to ensure they have ample capital at a time when the European financial system is excessively fragile. Moreover, mining and oil outfits are required by both the U.S. and the EU to publish their taxes and other payments made in other countries.
These moves follow increased scrutiny of the tax practices of major companies in places like Ireland, where Apple (NASDAQ:AAPL) owns subsidiary corporations that pay minimal taxes, a deal negotiated with the Irish government.
Hearings this week in Washington D.C. saw Apple CEO Tim Cook pressured regarding the subject of whether or not his company avoided taxes. The company claims to pay all taxes due in every country it owes them, and Mr. Cook pointed to a larger problem of the way multinationals are taxed — specifically the repatriation taxes the company would face if it were to move its massive cash holdings back to the U.S. from abroad. In maintaining so much capital outside its home country, the Apple chief executive said, “We not only comply with the laws, but we comply with the spirit of the laws.” Apple has over $130 billion stashed outside the U.S.
Starbucks (NASDAQ:SBUX) has also contributed to the EU conversation, as last year it paid the British government 20 million pounds after telling the U.K. that it wasn’t profitable previously.
British Prime Minister David Cameron indicated that tax avoidance will be discussed at the next meeting of the Group of Eight leading industrial economies, with the Organization for Economic Co-operation and Development saying that moving funds into tax havens among larger corporations is an ever-growing problem.
The rule could be introduced as soon as 2015, as only one existing proposal needs to be amended, pursuant to European Parliament approval.
The effort to monitor this sort of activity is likely not going anywhere, despite Mr. Cook and others calling for a simpler tax policy, considering the Senate report found that Apple uses “offshore structures, arrangements, and transactions to shift billions of dollars in profits away from the United States and into Ireland, where Apple has negotiated a special corporate tax rate of less than 2 percent.”