Luxembourg is actually quite small. Its population corresponds to that of Dസ്സsseldorf, a region of Saarland. However, the Grand Duchy is a giant as a location for multinational corporations. It made a profit of about $ 66 billion The calculations of Berkeley economist Gabriel Sukman Two of his colleagues moved to Luxembourg in 2017 alone.

The opaque system of mailbox companies and the average three per cent tax awaited them there. At the same time, Germany, which had a tax rate of 20 per cent, escaped a roughly equal amount – which is equivalent to a good chunk of corporate tax revenue.

Such calculations are not possible until recently due to the lack of relevant data. Even more important is the decision taken by European finance ministers on Thursday: large corporations known as Country-by-Country Reporting (CBCR) will destroy the EU country’s profits and tax payments in the future.

European solidarity seems different

The decision is a sign of European self-esteem. If the international community wants to take tax policy seriously, its members should not allow corporations to play with each other. Unlike Luxembourg or Ireland, the European Union countries with no tax base are the biggest losers in the world in this game. However, it seems that the biggest profits are made by USA-based multinational corporations.

According to the European Commission, the tax rate in Ireland was 0.005%. To date, the Irish government has refused to collect 13 billion euros in taxes from Apple on the instructions of Brussels. European solidarity seems different.

As expected, if the EU Parliament approves the CBCR, tax strategies will no longer be blocked. It will be easier for journalists, NGOs and interested citizens to understand how corporates distribute their profits and how to reduce taxes. This can create general pressure leading to change. That was after the so-called Panama Papers or Lux Leaks scandal.

Clearly this was a rarity about illegal economic construction. Tax evaders often move to gray areas or use models officially offered by the states. That is why the objection of the CBCR opponents that the tax authorities already have all the data is not convincing.

Wirecard as a warning

This is because everything a tax official has to accept is not problem-free. Also, the authorities may not even recognize crooked deals if they are distributed efficiently around the world. This is especially evident in the scandal surrounding the wirecard, a non-payment payment service provider, which, with the help of trustees, concealed suspicious payment flows and destroyed many small shareholders. MEP Sven Geegold (Greens), who has long fought for disclosure, says CBCR is now improving the wealth of information for investors.

Other objections to the CBCR are not subject to scrutiny. One of them reads: The publication of data is an invasion of tax secrecy, which will benefit non-European competitors. There is no doubt that tax secrecy is a valuable asset. However, the disclosure liability does not affect private individuals or SMEs. This only applies to groups with an annual turnover of at least 750 million euros, which are already subject to extensive publishing obligations. If business secrets can be disclosed they are also subject to exclusion laws.

In Germany, economic warnings have long been successful. When former federal finance minister Wolfgang Schubel (CDU) introduced the commission’s first CBCR draft in 2016, it slowed down only on a few occasions. In the current vote, Federal Economy Minister Peter Altmeyer (CDU) abstains – SPD boss Bes Norbert Walter described what he described as a humiliating victory by lobbyists for the Borjans Spiegel, while Federal Finance Minister Olaf Scholes (SPD) backed the position, while others opposed the party leadership.

This will not be the last fight. Europeans have been debating the general tax base of corporate taxation for years. Because they have not even agreed on how to calculate the companies’ tax. Different rules still exist in tax competition. With the help of new publishing requirements, this should at least be clear.