"The recent leak of the Panama Papers scandal has lead to global tax dealings of multi-national corporations coming under increased scrutiny, particularly when it comes to perceived tax havens all over the world.
The tiny state of Luxembourg therefore found itself in the firing line having enjoyed a long-held reputation for shielding dealings that in the current climate would be deeply frowned on.
Authorities have done their best not to overlook the public mood and have subsequently stepped up efforts to ensure that global rules are being tightened to an acceptable level, and Luxembourg is no different.
Now, new rules dictate that the country will be required to disclose global tax information after the release of draft legislation aimed at ensuring international tax reporting rules are being followed.
Known as country-by-country reporting, the rules were released last year by the Organization for Economic Cooperation and Development as part of a coordination multi-country effort against tax-base erosion and profit shifting.
Luxembourg is one of 44 nations to have signup up to the Multilateral Competent Authority Agreement on the Exchange of Country-by-Country Reports, meaning it has subsequently committed to participating in a global exchange of the reports.
Country-by-country reporting rules were approved by the European Parliament in May and now look poised to take hold inside Luxembourg law.
They will require firms to submit a global blueprint that would outline where they were operating, paying taxes, and earning income.
As a result, all companies with some sort of presence in Luxembourg and have consolidated annual group revenue of at least 750 million euros will be obliged to file reports for tax years beginning after Jan. 1, 2016, or else face fines as much as 250,000 euros.
Combating base erosion and profit sharing (BEPS) is one of the most pressing priorities for many officials, with the method largely seen as a strategy for avoid taxation by moving profits from jurisdictions with high rates of taxes to those, like Luxembourg, with lower tax rates.
Ensuring that operations in Luxembourg are reported to authorities could help to ease the problem, with draft legislation also including a secondary filing system for companies that only have subsidiaries in the country and not the parent organisation itself.