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THE STATE OF THE EUROPEAN UNION
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The various avoidance techniques previously
described in this chapter can be fit together like
pieces of a puzzle to create labyrinthine corpo-
rate tax schemes, and there is no doubt that
some transnational companies are doing their
best to outwit anti-abuse measures contemplat-
ed in the legislation of a number of Member
States. A prime example is the tax scheme
mounted by Google, which is being used as a
model by other Silicon Valley tech companies.
Google has designed what is popularly known
as a “double Irish” or “Dutch sandwich”
scheme, which involves the creation of two
companies in Ireland (one of them legally regis-
tered in Bermuda) and a third located in The
Netherlands, the latter of which is used to chan-
nel funds and assets to classical tax havens that
only require foreign non-resident companies to
pay minimal, token taxes. The Lux Leaks scandal
brought to light additional corporate tax avoid-
ance schemes involving a string of other trans-
national corporations in various sectors.
Corporate transparency and country-by-
country financial reporting
To effectively counteract the negative econom-
ic impact of tax avoidance and evasion practic-
es, multinational countries must be legally
bound to follow “country-by-country report-
ing” (CBCR) procedures. According to CBCR
requirements, the annual reports of multina-
tional corporations must include breakdowns
of their profits, sales, number of employees,
assets and taxes paid for each country in which
they maintain operations. At present, they con-
solidate this data into regional or global figures,
a practice that makes it difficult for national tax
authorities to carry out revenue risk assess-
ments.
The EU assumed a leadership position in
2013 with the fourth revision of its Capital
Requirements Directive, which established a
country-by-country reporting system for the
European banking sector. This Directive has al-
ready been transposed into Spanish law
10
. It is
worth noting that by stipulating that informa-
tion contained in CBC reports filed by banks be
available to the public rather than being secret-
ed away in the files of tax authorities, this
European legislation exceeds the global stand-
ard for transparency contemplated in the OECD
Action Plan.
The possibility of extending CBCR require-
ments to all other business sectors is currently
being debated within the EU. Although the
Council indicated a willingness to do so, negotia-
tions on the issue subsequently ground to a halt
following the European parliamentary elections.
Although Action 13 of the BEPS Action Plan
also calls for country-by-country reporting using
a common template, it falls short of demanding
that information filed with tax authorities be
made available to the public. According to the
Spanish Government, the CBCR template will
be transposed to Spanish law during the first
semester of 2015.
Nevertheless, although CBCR helps countries
identify operations that may lead to tax avoidance,
it does not give their tax authorities all the infor-
mation they need to determine whether multina-
tional corporations are paying their fair share.
The formulary apportionment (unitary)
method utilised in the United States to appor-
tion corporate income between states has
proved to be an effective tool for determining
whether companies are paying the right amount
in taxes to each of the jurisdictions in which
10
Royal Decree Law 14/2013 of 29 November.