Ahead of the Council of EU Company Law Working Party group meeting scheduled for 24 January 2019, the Romanian EU Presidency published a presidency compromise text of the revised proposal for public country-by-country reporting (CbCR) in the EU. The proposal does not introduce significant amendments compared to the compromise reached earlier in negotiations.
Considering that no significant action has been taken on the issue since the EU Parliament vote in 2017, the Member States are still assessing the situation. Whilst previous Council Presidencies were taking a “wait and see” approach, the Romanian presidency is keen on re-examining the proposal.
Progress on public CbCR came to a halt when the Council Legal Service issued its Opinion in November 2016. The Opinion concluded that public CbCR was a taxation matter and did not fall within the ambit of the Accounting Directive, contrary to what was found by Commission Legal Services. The Opinion is based on the premise that the purpose of the proposals is the protection of the functioning of the internal market and prevention of tax avoidance rather that the protection of shareholders and the public interest under Article 50 TFEU.
In order for the public CbCR proposals to be characterised a “tax file” by the EU Commission, Member States must unanimously request that the Commission do so, therefore the legal Opinion alone has limited practical consequences without subsequent action. Some Member States still challenge the proposed legal basis of the original proposal, suggesting that it relates to taxation matters therefore falls within the ambit of Article 115 TFEU.
The European Parliament appears to be maintaining its steadfast support and went a step further in its initial opinion. The parliamentary Rapporteurs originally proposed the reduction of the 750 million euro threshold to 40 million and to extend the scope of the publication of the information beyond that relating to EU countries to every country in which they operate. The question of the legal basis was also assessed.
After the vote on the report in a joint committee meeting on 12 June 2017, the amendments were adopted by Plenary on 4 July 2017 (including a compromise on the 750 million euro threshold) and the file was referred back for inter-institutional negotiations.