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Following the release of the Panama Papers ten days ago, the European Union (EU) decided this past Tuesday to toughen its stance against tax avoidance.

During an April 12th press conference, EU Commissioner for Financial Stability, Financial Services and Capital Markets Union, Jonathan Hill, remarked that the release of the Panama Papers “strengthened our determination to make sure that taxes are paid where profits are generated.”

Tougher EU Tax Avoidance Proposal?

Following the EU’s progress in terms of selective tax advantages and automatic exchange of tax information and rulings, Hill unveiled a proposal that “would require larger multinationals - those with annual global revenues above 750 million euros - to publish information publically in seven key areas” on a country-by-country basis.

These seven areas, according to Commissioner Hill, are: “the nature of their activities; how many staff they have; their net turnover; their profit before tax; the amount of tax due based on yearly profits; the amount of tax they actually paid in that same year; and their accumulated earnings.”

Furthermore, said Hill, “Multinationals will also be required to report – as well as the country-by-country reporting within the EU – on the total tax they pay outside the EU.”

Considering the multiple parties involved in shaping this initiative, Hill believes “the proposal…is simple and proportionate and will help us to increase accountability,” and, ultimately, “build trust in Europe’s businesses and build trust in Europe's tax system.”

Alongside this proposal, the EU has decided it will release a comprehensive list of tax havens, one that the EU hopes will be better received than the previous list issued in 2015 and disparaged by several member states.

The plan is to have this list up and running by the end of 2017.

Criticism to EU’s Latest CBCR Plan

Despite these best efforts, several business groups and non-governmental organizations criticized the EU’s announcements.

Tove Maria Ryding, Tax Justice Coordinator at the European Network on Debt and Development, said, “As long as the proposal doesn’t cover all countries, multinational corporations will still have plenty of opportunities to hide their profits. So instead of solving the problem, this proposal would be moving the problem from one country to another, with multinationals still able to avoid taxes.”

Koen Roovers, Financial Transparency Coalition’s Lead EU Advocate, took a similar position, saying “it’s disappointing that [the EU] proposal fails to include global public country-by-country reporting for companies doing business in the EU. Instead they settled for a half-hearted hybrid that would keep most of the world in the dark.”

On the other hand, Business Europe, a “leading advocate for growth and competitiveness” in the region, issued a statement saying that the CBCR proposals “risk undermining the proper role of tax authorities in enforcing tax legislation, as well as creating uncertainty for business,” and, “by making the EU a lone frontrunner in terms of public disclosure, risk undermining our attractiveness as a location for investment, particularly from overseas."

Will the New List of Tax Havens Work?

As for the issue of the new list of tax havens, tax justice advocates and analysts also raised their concerns.

Transparency International’s Elena Gaita, a policy officer in Brussels, states, “This list of tax havens could be based purely on political convenience, excluding many countries. It will still allow the business of secrecy to continue as usual."

Guntram B. Wolff, the Director of the Belgian think-tank Bruegel, concurs, saying, “Drafting these lists, and pulling up the right names for tax havens, is a very political process.”

Wolff did say, however, “The commission toughened up since the release of the Panama Papers, partly as the mood shifted and partly because of backing from France and Germany.”

Earlier this week, per the Financial Times, both European powers urged “industrialised nations to pull together a common blacklist of territories that breach transparency standards” and “emphasised the need for sharing and publishing the names of the ultimate beneficiaries of all corporate structures, including shell companies, trusts and foundations that can offer anonymity to their users.”