Every year, corporate tax avoidance costs countries around the world an estimated US$500 billion. In the European Union (EU), the annual loss to profit shifting by multinational corporations is conservatively estimated to be €50-70 billion each year. This money is sorely needed to fund public services such as healthcare and education, as well as climate action and sustainable development. One of the key problems with today’s corporate tax system is the secrecy surrounding information about where corporations do business and what they pay in tax in those countries – a problem that can be addressed through the introduction of public country by country reporting.
Public country by country reporting (CBCR) would allow everyone – including citizens, policy-makers, journalists and researchers – to see information about where corporations do business and what they pay in tax in each country where they operate through “country by country reports”. This was introduced for the banking sector in the EU during the first half of 2013 and the measure has already been shown to disincentivise profit-shifting.
In the intervening period, a number of high-profile tax scandals such as LuxLeaks, the Paradise Papers and Mauritius Leaks have continued to expose systemic and wide-scale tax avoidance by multinational corporations and the enabling role that secrecy plays. Meanwhile, tax justice has remained a priority issue for citizens. In Europe, the Eurobarometer of public opinion continues to show that three quarters of citizens want the EU to intervene more than they currently do in the fight against tax fraud.
The following briefing provides an overview of the political process and existing country by country reporting.