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For the past few years there has been a silent war raging within the EU.
The battleground is the country-by-country reporting legislation (CBCR) which, according to specialists, will bring transparency and a level playing field to the European business arena.
The collateral damage of this war seems to have been European small and medium enterprises – whose interests are represented in Brussels by the very group that also represents the interests of the biggest multinationals.
Not implementing this has also meant that, according to tax transparency NGO Tax Justice Network, the EU loses over $120bn every year to tax abuse through the use of tax havens.
That’s nearly twice Luxembourg’s GDP.
Still, for a variety of reasons, despite campaigning from tax transparency organisations, the measure has been on- and off- the table for years.
The Portuguese presidency of the EU has now pushed for CBCR and, on 25 February, the European Council approved the implementation of this mechanism, which will now be subject to further negotiations in the upcoming trilogues later this month.
In the efforts leading up to this vote, however, there has been once voice consistently opposing it: BusinessEurope.
According to the Corporate European Observatory, which monitors EU lobbying, BusinessEurope is Europe’s most powerful lobbying group spending over €4m each year to influence communitarian legislation.
The group represents 40 business federations and, through them, millions of mostly European companies, many of them small or medium enterprises.
They also represent 66 corporations like Apple, Google, Microsoft, IBM, Pfizer or ExxonMobile which are among the world’s biggest tax haven users and the ones which stand to lose more with the implementation of this legislation.
On 16 February, BusinessEurope sent the Portuguese minister for economy, Pedro Siza Vieira, who also chairs COMPET, the Competitive Council configuration, a letter exerting pressure on the Portuguese presidency to withdraw CBCR.
BusinessEurope’s stance against CBCR is not new and the group knew that these and other matters would be discussed under the Portuguese presidency of the EU, so on 27 November 2020, António Saraiva was elected vice-president of BusinessEurope.
Small vs Big business
Saraiva is the current president of the Portuguese business confederation (CIP) and, when first elected, in 2009, said in an interview to Portuguese newspaper Público that CIP was “a confederation of SMEs, not of big business”.
On 30 November 2020, CIP announced on their website that Saraiva had been elected vice-president of BusinessEurope.
It said: “The election was confirmed in the Council of Presidents of BusinessEurope (CoPres), which was held by videoconference at CIP’s invitation, and that had in the working agenda, as first speaking point, an exchange of views with the Portuguese government about the priorities of the upcoming Portuguese Presidency of the Council of the EU.”
It then added: “The time span in which António Saraiva will perform his duties is particularly important, due to the connection CIP will make between the Portuguese presidency of the Council of the EU and BusinessEurope.”.
CIP does not believe there is any contradiction in having an anti-public CBCR, and defending the interests of SMEs.
By email, an official source explained that they defend Organization for Economic Cooperation and Developoment (OECD) recommendations of non-public disclosure of this information, meaning that only the countries tax authorities would have access to it.
They argued that “public CBCR would not help fight tax evasion (it might even get in the way of competent tax authorities) and would put companies with a presence in the EU in a competitive disadvantage, damaging the EU attractiveness as an investment destination.”
They then conclude that “this stance taken by BusinessEurope does not, in any way, hurt the interests of SMEs”.
However, considering that the transfer of funds from where the wealth is produced to tax havens is essentially an instrument at the disposal of large multinationals, the introduction of CBCR would bring SMEs a level playing field and could benefit their competitiveness.
So if BusinessEurope represents millions of SMEs, how do they justify their opposition of the measure?
After several contacts, the group declined to comment any further – stating that their position was clear on the letter sent to the Portuguese minister of economy. The letter, however, makes no mention of SMEs.
Accusations of BusinessEurope defending essentially the interests of big business aren’t hard to find.
Ana Gomes, MEP, former Portuguese ambassador and presidential candidate, who is particularly active in this field and involved in past attempts to implement CBCR, says the interests they have at heart are essentially those of the ‘Big Four’ (referring to the four behemoth accounting firms Deloitte, Ernst & Young, KPMG and PricewaterhouseCoopers) and says that of “a sector of companies which is not that of small and medium ones, but the big ones which are the main beneficiaries of the strategies of tax avoidance and evasion.”.
Portuguese MEP João Ferreira agrees and says that BusinessEurope “fundamentally defends and represents the interests of big business, not those of SMEs”.
In a statement sent to us, not mentioning Saraiva directly, the Portuguese Confederation of Micro, Small and Medium Enterprises (CPPME) is also quite clear: “[we] consider CPCR to be an important instrument in the international fight against fraud and tax avoidance and even think it could go further”.
They add that they stand against BusinessEurope’s position and argue: “this instrument is essential to put an end to several mechanisms such as preferential tax treatment for intellectual property, transfer pricing agreements and unfair tax competition between jurisdictions which, frequently have been used to the disadvantage of SMEs”.
MEP José Gusmão, on the other hand, is quite blunt: “By opposing the approval of CBCR, António Saraiva sides with the multinationals and defends the maintenance of a system that allows them to escape taxation and to pay as little as they can, therefore hurting SMEs and European citizens in general.”
Alex Cobham, chief executive of the Tax Justice Network, told us that “it seems extraordinary that national business federations, or their representatives at BusinessEurope, would be lobbying against a level playing field for the great majority of their members – who are SMEs”.
He then offers a possible explanation: “Any national business federation is likely to be made up, overwhelmingly, of SMEs. And so their interest, equally overwhelmingly, is in ensuring a level playing field for their members by supporting public CBCR.
“The fact that BusinessEurope is lobbying so aggressively against the proposal for the EU to require public CBCR is a clear indication either that BusinessEurope has been captured by the multinationals, or their paid advisers including the ‘Big Four’ accounting firms; or that the national federations have themselves been captured.”
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