TOKYO -- The European Union's proposal this week for stricter regulations guarding against tax evasion has drawn criticism from Japan's leading business lobby and other groups as a violation of international standards.
The plan, announced Tuesday, targets companies with annual global revenue of over 750 million euros ($846 million) that operate in the EU. They would be required to publish key information, such as the amount of tax they pay, on a country-by-country basis. The companies also would disclose the taxes they and their parents have paid in the rest of the world. The EU would request that these companies post the data on their websites.
The goal is to discourage companies from transferring profits and royalties to their parents or subsidiaries in order to reduce their tax burden in Europe.
The current international standards, finalized last year by the Group of 20 countries and the Organization for Economic Cooperation and Development, require only that the parent company report tax activities, including for subsidiaries, to the relevant countries' authorities.
For a Japanese company with a European subsidiary, this meant Japanese authorities would provide information as needed to their European counterparts via a confidential report. The Japanese government pushed heavily for this framework on concerns that the country's trade secrets could leak to foreign entities.
"It's wrong for the EU to tighten regulations on its own, when we've finally created common tax rules," said an official from the Japan Business Federation, or Keidanren.
The lobby will protest the EU proposal in its report on the international tax regime to be published Tuesday. The American business community also opposes the initiative, which it says would impose a greater administrative burden on companies and put their trade secrets at risk. Economic and business leaders from the Group of Seven countries also are expected to issue a statement against the proposed rules.
The EU's tough stance reflects strong public opinion against large corporations within the bloc. The Panama Papers, which revealed a number of tax avoidance schemes, have further fueled the push for tougher tax regulations.