The Republic’s European Commissioner Mairead McGuinness has denied accusations by MEPs that her department sought to pressure European Union (EU) member states to limit tax transparency, in a row over a letter sent to capitals advising them on how to implement a new rule on tax reporting by multinational companies.
The deadline passed last month for EU countries to implement the new Country-by-Country Reporting Directive, a tax transparency rule designed in the wake of the Panama Papers scandal that requires large multinational companies to publish how much they earn and how much tax they pay in each country.
As the deadline passed, EU lawmakers were enraged by a leaked letter sent by the European Commission to member states advising them against ‘gold-plating’, a term referring to the adding of extra provisions to beef up EU law when it is transposed into national law by member states.
In a statement to the European Parliament on Thursday, Ms McGuinness told MEPs the intention of the letter was to “prevent member states from imposing unjustified obligations that go beyond the legislation, or that could disrupt the level playing field”.
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“These differences could also lead to regulatory arbitrage where companies take advantage of differences in law to circumvent requirements, but it’s also bad for the single market,” the financial services commissioner told MEPs.
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However the country-by-country reporting law includes a clause that encourages governments to go further than the minimum set down in the Bill to ensure tax transparency, and several MEPs accused the commission of seeking to exert political influence.
“In this letter the commission provided what appears to be guidance on how member states should implement the country-by-country reporting directive, but in fact this letter advises member states to limit transparency, to limit tax transparency,” Austrian centre-left MEP Evelyn Regner, who was a lead negotiator of the law, told the chamber.
“This guidance provided in the letter aren’t technical guidance, this guidance has political influence and this constitutes a transgression.”
She accused the letter of “overshooting the mandate of the European Commission behind the back” of the European Parliament.
German Green MEP Rasmus Andresen said that EU member states were “losing billions” due to companies “playing around with profits and shifting profits”.
“It’s a bit of a scandal that you as commissioner want to put the brakes on member states. We should be happy if member states want to go further,” he told Ms McGuinness.
However Czech MEP Jiri Pospisil, who sits in Ms McGuinness’s European People’s Party political group, stepped in to defend the commissioner.
“Gold-plating is bad,” he told the chamber. “Any divergence is going to lead to the fragmentation of the single market. If each country is going to adopt a different set of rules, transgressing the boundaries set by the directive then we’re going to have 27 pieces of legislation and that’s wrong.”
Only 10 EU member states met the deadline to transpose the directive into national law, and Ms McGuinness told the MEPs she was “fully focused” on ensuring the remaining 17 implement the new rule effectively.
“I voted for this as a member of this parliament. I would not stand over anything that gives the appearance or indeed the possibility of limiting transparency,” she told the MEPs.
“We cannot and would not lower the ambition of member states, they are free to go further. We just point out the level playing field implications.”
