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EU: European Commission’s public CBCR proposal moves beyond challenges


Bob van der Made

Negotiations between the EU's 28 member states are continuing on the European Commission's proposal for public country-by-country reporting (public CbCR), but whether the measure is adopted remains unclear.

The General Secretariat of the EU Council's legal service was asked by a number of member states to look into the legal basis, and hence the lawfulness, of the Commission's proposal, which was presented on April 12 2016 (Proposal for a Directive of the European Parliament and of the Council amending Directive 2013/34/EU as regards disclosure of income tax information by certain undertakings and branches).

The Commission had decided that public CbCR will be treated as an EU company law/internal market initiative, i.e. not as an EU tax legislative initiative. This choice by the Commission means that the European Parliament is a co-decision maker together with the Economic and Financial Affairs Council (ECOFIN) Council, and that a compromise text would need to be hammered out between the Council (voting by a qualified majority) and the EU Parliament (voting by a simple majority).

However, a number of member states have opposed the Commission's decision, arguing that there is a lot of tax in the proposal and it should, therefore, be treated as a legislative tax change instead. This would mean that only a consultation with European Parliament would be required and the final decision on approval would be made by a unanimous vote by the ECOFIN, with vetoing powers for each member state.

The Council's legal service issued its (confidential) legal opinion in mid-November. Although the report has not been published, media reports said that the opinion concludes that the Commission's proposal should have the same legal basis as the EU's DAC4 Directive, which incorporates Action 13 of the OECD's BEPS recommendations into EU Law.

However, the Commission's legal service strongly disagrees with its counterpart in the EU Council. Such different views and disagreement between the Commission and the Council's legal advisers is not uncommon, but it normally stays behind closed doors. The situation, in this case, is reminiscent of the Council's legal opinion requested by the UK in 2013 on the lawfulness of the Commission's proposal for an EU financial transaction tax.

The Commission does not intend to change its position on the public CbCR proposal, nor is it obliged to, because the Commission has the sole right of initiative in the EU's decision-making process i.e. with regard to all EU legislative proposals. It is also the Commission's prerogative to choose the legal basis of EU Directives.

At the time of writing, EU member states were continuing their technical discussions in the EU Council on the public CbCR proposal and were analysing and discussing the negative legal opinion of the Council's legal service in the Council's working party on company law.

Going forward, member states can either continue their discussions in the EU Council and try to reach a consensus on the Commission's proposal by amending the text – but not the legal basis – after which a final compromise must be sought with the European Parliament and the Commission, or they can decide to reject the Commission's proposal in a vote.

From November 1 2014 a new procedure for qualified majority voting applies in the Council. Under this procedure, when the Council votes on a proposal by the Commission, a qualified majority is reached if two conditions are met:

  • 55% of member states vote in favour – in practice this means 16 out of 28; and

  • The proposal is supported by member states representing at least 65% of the total EU population.

This new procedure is also known as the "double majority" rule. However, equally important here is the blocking minority option in this procedure. The blocking minority must include at least four council members representing more than 35% of the EU population. This option would appear to be the more likely outcome in this highly charged dossier given a certain number of member states' known resistance to the Commission's proposal, although it remains difficult to predict.

Bob van der Made (

PwC EU Public Affairs-Brussels

Tel: +31 6 130 96 296


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