Latvia votes against EU tax transparency directive

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12 European Union countries, including Latvia and Estonia, voted against a directive, which would force multinational companies to their profits and paid taxes for each EU country individually, according to a November 28 article by The Guardian.

The article pointed out that a majority of the countries voting against the directive have low corporate tax rates, which are appealing to large multinational companies (MNC). Economics Minister Ralfs Nemiro's Public Relations Representative Beata Jonite told LETA news agency that the Latvian vote was “against” the “voting procedures, not against the substance of the proposal”.

Ministry of Economic Parliamentary Secretary Jurģis Miezainis participated in the EU Competition Council meeting where the issue of MNCs and taxes was raised, and says the problem was with the legal basis of the directive and the voting procedure.

"In accordance with the Finance Ministry position, which was approved by Saeima and the Cabinet of Ministers, Latvia voted against the corresponding proposal due to the voting procedure," said Miezainis.

As a whole Latvia supports the main goal of combating tax avoidance and the substance of the directive - obligating specific companies and subsidiaries to publicly reveal information about tax payments and other related information.

"However the EU Council Legal Service admitted that the legal basis chosen by the European Commission is not appropriate, because the directive relates to taxation issues and should be looked at in accordance with the EU framework decision as a unanimous decision, not a qualified majority, where country influence is proportional to population," according to the EM statement.

If Latvia supported the Finnish directive under the defined voting procedure it could create a precedent and decrease the influence of Latvia, as a small country, over EU tax issues in the future. The Ministry of Economics considers that such taxation issues should be unanimous.

In accordance with the Finnish Presidency's closing remarks, work on finding a sensible solution for the directive will continue. The proposal would oblige companies earning over 750 million euros a year to reveal their profits and tax payments. Finland had named transparency as one of the main Presidency issues.

International anti-corruption organization Transparency International Representative Elena Gaita expressed outrage over the votes against the directive. When the Panama Papers revealed the extent of international tax avoidance schemes the European Commission promised to address the issue. The organization hopes that the Croatian and German Presidencies will also address transparency as a priority issue.

This problem is still apparent in the EU, with several MNCs leaving countries such as the UK, France and Germany to move their legal addresses to low-tax or tax-free zones such as Luxembourg, Malta and Ireland. The vote was the first time the directive document was discussed on a political, instead of technical level.

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