EU plan to stop corporate tax dodging is 'close to pointless', major charities warn

New proposals by the European Commission to help crack down on tax dodging by multinational corporations are “close to pointless”, major international charities have warned.

Oxfam said the EC’s proposals to make firms operating in Europe report where they make profits and pay tax would allow companies to continue to “rob the world’s poorest”.

Christian Aid meanwhile said the plans would allow “dodgy business as usual”.

The proposed rules would require profits and taxes paid to be reported when they are made in the EU and a list of designated tax havens, which has yet to be drawn up.

Campaigners have long asked for so-called 'country-by-country reporting' of tax affairs but the latest EC proposals are only a limited version of the rule.

“The European Commission's piecemeal proposals are not enough to end tax dodging that robs the world's poorest people of billions in lost revenue each year,” said Mark Goldring, the charity’s GB chief executive.

“The new plans only require big companies to report on their activities in the EU and a yet-to-be-decided list of tax havens that is likely to be arbitrary and limited. Unless these proposals are extended to cover all countries there's a risk they could be close to pointless, as businesses will still be able to dodge taxes by diverting money to territories not included on the list.

Toby Quantrill, Chrisian Aid’s tax justice expert, said: “The Commission plans will allow multinationals to hide large parts of their global affairs from public scrutiny, which is a recipe for dodgy business as usual.

“Unless companies have to report on their activities in all the countries where they operate, they could continue to dodge tax on a massive scale, using the places still hidden from view.”

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Diarmid O’Sullivan, ActionAid Tax Policy Adviser, said the plan was "a huge missed opportunity which falls far short of what is needed to stop multinationals hiding tax dodging behind opaque corporate structures".

The latest proposals come a week after a massive leak of documents from a Panama-based law firm provided evidence of the true scale of offshore banking by the world’s super rich including dozens of current and former world leaders.

Politicians in the UK, including David Cameron, have come under increased scrutiny as a result of the revelations. The PM admitted at the weekend that he benefitted from an offshore trust set up in the Bahamas by his late father. He denies any wrongdoing and says it was not set up to avoid tax.

Mr Cameron made his tax affairs public on Saturday, with the Chancellor and leader of the opposition following on Monday.

The European Commission was criticised last year when a tax haven blacklist omitted to include key EU countries accused of facilitating tax avoidance – like Luxembourg. The list was later withdrawn.

Lord Hill, the EU's financial services commissioner, said: “This is a carefully thought through but ambitious proposal for more transparency on tax.

“While our proposal on [country-by-country reporting] is not of course focused principally on the response to the Panama Papers, there is an important connection between our continuing work on tax transparency and tax havens that we are building into the proposal.

The Chancellor George Osborne said the policy was “a great example of the UK winning the argument in Europe” and said they were “a step in the right direction”.