Documents considered by the Committee on 14 December 2016 Contents

11Income tax: disclosure of information

Committee’s assessment

Politically important

Committee’s decision

Cleared from scrutiny; further information requested

Document details

Proposed Directive amending Directive 2013/34/EU about disclosure of income tax information

Legal base

Article 50(1) TFEU, ordinary legislative procedure, QMV


HM Treasury

Document Number

(37663), 7949/16 + ADDs 1–2, COM(16) 198

Summary and Committee’s conclusions

11.1In the context of the OECD/G20 Base Erosion and Profit Shifting tax avoidance action plan we reported in May 2016 a proposed Directive, based on the OECD model Action 13, to require all large EU headquartered multinational enterprises (MNEs) and non-EU headquartered MNEs operating in the EU with a total consolidated group revenue above €750 million (£676 million) to publish a country-by-country report. We saw no problem with the proposal, but asked to be informed about Council consideration of the matter.

11.2The Government tells us that there have been sensible technical improvements to the text and that it is minded to support the Presidency compromise in the Council.

11.3We are grateful to the Government for its account of where matters stand on the proposal and are now content to clear the document from scrutiny. However, we wish to be kept informed of developments in trilogue consideration of the proposed Directive.

Full details of the documents

Proposed Directive amending Directive 2013/34/EU as regards disclosure of income tax information by certain undertakings and branches: (37663), 7949/16 + ADDs 1–2, COM(16) 198.


11.4The Organisation for Economic Co-operation and Development (OECD) defines base erosion and profit shifting (BEPS) as tax planning strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations where there is little or no economic activity, resulting in little or no overall corporate tax being paid. In October 2015 the OECD published a report setting out an Action Plan with 15 measures to address the BEPS problem. This package of measures was endorsed by the G20 in November 2015.52 Action 13 is entitled “Transfer Pricing Documentation and Country-by-Country Reporting” and contains a model for country-by-country (CbC) reporting by multinational enterprises (MNEs).53

11.5At present only the banking sector, under the Capital Requirements Directive, Directive 2013/36/EU, (known as CRD IV), and the extractive and logging industries, under the Accounting Directive, Directive 2013/34/EU, and the Extractive Industries Transparency Initiative,54 are already subject to public CbC reporting requirements.

11.6In April 2016 the Commission presented a proposal for a Directive to amend the Accounting Directive to introduce wider public CbC reporting of tax information. Based on the OECD model, the proposal would require all large EU headquartered MNEs and non-EU headquartered MNEs operating in the EU that have a total consolidated group revenue above €750 million (£676 million) to publish a CbC report. This is the OECD threshold in its CbC model and it estimates that this would cover MNEs controlling around 90% of corporate revenues, whilst excluding 85–90% of MNEs from the requirements.

11.7This proposal would not modify CbC reporting rules already in place for the banking sector and extractive and logging industries.

11.8When we considered this proposal, in May 2016, we heard from the Government that the OECD reporting model had recently been implemented in the UK, which it expected to have a significant beneficial effect for its revenues. It told us that it:

11.9While the Government did not alert us to any particular problems with this proposed Directive, we wished to hear about any issues that might emerge during Council working group consideration of the matter, particularly any which might affect eventual agreement on the proposal. Meanwhile the document remained under scrutiny.

The Minister’s letter of 6 December 2016

11.10The Financial Secretary to the Treasury (Jane Ellison) tells us now that:

11.11The Minister elaborates that:

11.12The Minister noting that the legal basis of the proposed Directive is Article 50 TFEU, adds that, although this has been questioned, the Commission have maintained that article is the correct legal basis as the proposal concerns necessary safeguards required of companies or firms for the protection of the interests of others.

11.13The Minister comments further that:

Previous Committee Reports

Thirty-third Report HC 342-xxxii (2015–16), chapter 11 (11 May 2016).

54 A global standard to promote open and accountable management of natural resources: see

16 December 2016