Debate: Recommendations of the Commission on public country by country reporting transposition
Date: THURSDAY, 13 JULY 2023
Speaker: Mairead McGuinness
Language: EN

And maybe to recall that when I was a Member of this House, I voted in favour of this directive, and as Commissioner I oversaw the finalisation of negotiations. The Commission stands fully and firmly behind this directive. It is an important transparency measure that will enable everyone to see where big multinational corporations that are active in the European Union pay tax. So it’s important to make sure that it is implemented correctly. And this is the context for the Commission paper you have expressed concerns about. The Commission is the guardian of the Treaties. It is the Commission’s duty to ensure that EU law is correctly transposed in national law and correctly applied in practice. As part of this, the Commission works with Member States to help them implement directives correctly and on time. And this is in line with the text, of course, as agreed by the co-legislators. The Commission’s services follow the better regulation guidelines when helping Member States to transpose directives. These guidelines were developed in line with the Interinstitutional Agreement between the European Parliament, the Council and the European Commission on Better Law-Making. The Commission aims to prevent Member States from imposing unjustified obligations that go beyond the legislation or that could disrupt the level playing field. And this is what is known as ‘gold-plating’. The better regulation guidelines state that when transposing directives, Member States should refrain from unjustified gold-plating – in other words, adopting transposition measures that go beyond the requirements of the directive – and ensure a level playing field. Gold-plating has a negative impact on the single market. The level playing field is a fundamental principle of the single market. The level playing field helps make sure that all businesses in the single market compete on fair and open terms. And this is true for this directive, just as it is for any other directive. The Commission helps Member States to keep national transposition as close as possible to what the co-legislators agreed. Working in partnership with Member States on implementing EU law is one of the main features of the Commission’s enforcement policy, and this is to ensure that EU laws are applied correctly and on time. Technical work includes organising transposition, workshops and providing guidance documents. Most of the topics discussed during the pre-transposition phase are based on issues or questions raised by Member States, but also on the Commission services’ analysis. It is in this context that the Commission services drafted the information paper. This paper mainly addresses technical issues and was discussed with Member States during two workshops before being finalised. These meetings were held to help Member States to implement EU law correctly and consistently. The paper is addressed to Member States as it is Member States that are responsible for transposing directives into national measures. In particular, the paper draws Member States’ attention to difficulties that third-country multinational companies may experience when making their reports due to different national rules. These differences arise when European rules are transposed differently. The paper identified only a limited number of areas of concern, and there were three: the scope of application, the content of a company’s report and the audit requirement for subsidiaries. Gold-plating will make it harder for these companies to comply with different national rules, possibly to a point where legal certainty is at stake. These differences could also lead to regulatory arbitrage, where companies take advantage of differences in law to circumvent requirements, but is also bad for the single market. Indeed, you may ask why this paper now on this particular directive? This directive is one of the first of its kind and, as something new, it was to be expected that the Member States would ask the Commission for guidance. The directive, as the co-legislators agreed, strives to ensure that through their subsidiaries and branches in the EU, third-country multinational companies doing business in the EU provide the same information as EU-based multinational companies. These subsidiaries or branches may be located in several Member States. This feature is the main reason behind the information paper: should Member States adopt different rules? But I also want to emphasise that informing Member States of the drawbacks of gold-plating does not mean prohibiting anything. Ultimately, Member States can add reporting obligations as they see fit. The Commission’s decision to propose this legislation dates back to 2016. Colleagues, you know that the European Union is a front runner globally in tax transparency. I look forward to seeing the first reports published by multinational companies under this directive. We welcome public scrutiny on where companies earn their profits and where they pay their corresponding corporate tax. Transparency by tax payments to understand how large multinationals operate is vital for public trust and confidence in the fairness of our tax system. I look forward to hearing your concerns now and hope that I have clarified the Commission’s work in ensuring implementation in full and on time.