On 17 June 2015, the European Commission launched a public consultation on further corporate tax transparency, which suggests a variety of tax transparency measures including country-by-country reporting (see here). The consultation is intended to gather feedback on which companies should offer more tax transparency and to whom. The deadline for the consultation is September 9, 2015.

Country by Country reporting – OECD action and EU policy options

Aggressive tax planning and profit shifting have preoccupied governments around the world and as the EU considers its options in this consultation, it is likely to be guided by OECD plans in this area. Country-by-country reporting would require multinational companies to disclose key financial information on every country where they operate. The OECD and G20 countries are finalising a 15-point action plan to tackle base erosion and profit shifting (BEPS). One particular action point, BEPS Action point 13 (BEPS 13), recommends that, at State level, very large multinational enterprises (turnover > EUR750m) provide a Country-By-Country Report (CBCR) to the relevant tax authority. On 8 June 2015, the OECD issued the Implementation Package in relation to this BEPS 13 and the Commission will certainly use these OECD recommendations on country by country reporting standards as a starting point. However, OECD and G20 countries are not obliged to follow or implement the recommendations of the BEPS project, and not all EU Member States are OECD members.

In addition to these measures in the pipeline, regulated credit institutions in the EU are already obliged to disclose country-by-country reports (CBCR) under the Capital Requirements Directive IV (CRD IV), which is being implemented in the EU member states.[1] The Commission may consider extending these requirements to all other sectors.

Details of the Commission’s consultation

The consultation is intended to gather feedback on which types of companies should offer more transparency; to whom they would disclose information (tax authorities or the public) and what type of information should be disclosed. A key element of the consultation is whether any initiative should follow closely the BEPS initiatives of the OECD and G20.

The consultation proposes a range of tentative options to improve tax transparency.

  1. No EU Action
  2. Implementation of BEPS 13 at EU level
  3. Publication of anonymised/aggregated data by the EU tax authorities
  4. Public disclosure of tax-related information by enterprises
  5. Publicly available corporate tax policies published by enterprises in relation to their approach towards tax compliance and planning

The Commission is exploring ways to improve information exchange between tax authorities and the scope of application of the transparency requirements – whether it will follow the same scope as the BEPS requirements or define the scope wider. If the Commission opts for public disclosure requirements, they must consider, what level of information would be necessary to include in a publicly available country-by-country report, with options ranging from disclosing information already required under both CRD IV and BEPS 13; disclosing some additional information such as subsidiary operations in each country, tangible assets, accumulated earnings (normally only available to tax authorities) or even disclosing tax rulings (normally exchanged between tax authorities) and public subsidies received (currently only required from financial institutions). And which companies will be required to disclose this information? The Commission is examining whether non-EU multinationals with branches or subsidiaries in the EU should be covered by any new EU corporate tax transparency rules. Respondents also have the opportunity to estimate the additional costs and resources involved in country-by-country reporting.

Objectives of the Commissions consultation

The consultation is part of a broader Commission action plan against aggressive corporate tax avoidance in the EU. Under this plan, the Commission aimed to re-launch the Common Consolidated Corporate Tax Base (CCCTB), ensure effective taxation and increase transparency. On 18 March 2015, the Commission presented a package of measures to boost tax transparency, including a proposal for the automatic exchange of information on cross-border tax rulings between Member States.

The objective of this consultation is to explore ways to increase pressure on companies to move to a system on the basis of which the country where a business’ profits are generated is also the country of taxation. A Commission impact assessment is being prepared to assess whether providing more information to either tax authorities or to the public would increase public pressure on companies and intra-authority peer pressure on tax authorities in Member States to take measures to stop ‘tax competition’ between Member States. The Commission is also concerned that corporate tax avoidance distorts the internal market and the level playing field between taxpayers – in particular between locally based SMEs and large multinational companies who have the potential to use more sophisticated tax planning tools to spread their tax base internationally.

Maneuvers in the European Parliament

In a parallel legislative procedure and independent of the Commission consultation, on July 8, the European Parliament has adopted certain amendments to the Shareholders Rights Directive that would oblige certain large undertakings to publicly disclose country-by-country reports (see here). The information required by the proposed amendment includes: names, nature of activities and geographical location; turnover; number of employees on a full time equivalent basis; value of assets and annual cost of maintaining those assets; sales and purchases; profit or loss before tax; tax on profit or loss; and public subsidies received. There are also rules concerning disclosure of a summary of tax rulings. However, the Parliament’s amendments did not receive the support of the Commission and the proposals have been sent back to the Parliamentary committee for consideration. The committee has now maximum two months to report on the concerns of the Commission and monitor the progress in the Council of the proposal. Nonetheless, these maneuvers show the European Parliament’s appetite to adopt rules on country-by-country reporting.


The results of this consultation will shape the Commissions thinking on tax transparency and is the first step on the path towards European and perhaps international country-by-country reporting.

Multinational companies with a European presence should expect increased scrutiny in the future – either from tax authorities or the public, or from both. The Commission’s consultation process provides companies with an opportunity to have their say on the scope of this disclosure. Many companies and interest groups have already provided valuable inputs into the CBC reporting initiative in BEPS 13. However, since the EU initiative has the potential to impose different requirements than BEPS 13, close attention should be paid to this consultation. Covington uses the combined expertise of its Tax practice and its Public Policy & Government Affairs practice to provide advice to clients on this consultation.

The consultation will close on September 9, 2015 and the Commissions impact assessment will be published in Spring 2016.

[1] Directive 2013/36/EU on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms (CRD IV).


Photo of Guy Dingley Guy Dingley

Guy Dingley is a partner in Covington’s London office, concentrating on taxation and employee benefits, with a particular emphasis on corporate taxation and value added tax, taxation of investment funds, global mobility, and the establishment of incentive arrangements.

Guy’s practice encompasses corporate and…

Guy Dingley is a partner in Covington’s London office, concentrating on taxation and employee benefits, with a particular emphasis on corporate taxation and value added tax, taxation of investment funds, global mobility, and the establishment of incentive arrangements.

Guy’s practice encompasses corporate and business acquisitions and disposals, mergers and reconstructions together with advice on the tax aspects of supply chain management and employee remuneration.

In the share incentive arena, Guy has advised clients on the establishment of a wide range of share incentive arrangements designed to suit their business objectives, and often with tax benefits.

Guy has extensive experience of structuring investments and acquisitions in over twenty five jurisdictions, including continental Europe, Australia, India, and China. His expertise covers a wide variety of industry sectors, but he has particular experience in the life sciences, telecommunications and media, branded goods and energy arenas.