• Country by Country Reporting: An idea whose time has come

    Posted by Gershon

    23 April, 2013

    I blogged last year about a shocking global conspiracy that was doing immeasurable harm to the world and ripping billions upon billions of dollars out of  developing country coffers (more money than they receive in aid). I despaired that the biggest perpetrators of this enormous crime were continuing to enrich themselves at the world’s expense while getting away scot free. Well here’s the update; all that’s starting to change. The world is standing up and taking notice, and for the criminals, it looks like it’s time for them to start paying the piper.

    At the centre of this global crime wave are multinational companies who have manipulated the global economic system to allow themselves to shift their profits away from the nations where they actually operate and into tax havens. This deprives countries of the funds they need to support their citizens, which means less roads, doctors, police, schools and teachers. In developing countries this translates to less lives saved, less children educated and a prolonged experience of poverty.

    The situation in Zambia is illustrative. The nation believes that it is owed up to $1 billion dollars in unpaid taxes from copper mining. It looks like much of this money has been deprived from them by multinational mining firms like Glencore who have chosen to route copper exports through tax havens like Switzerland in order to take advantage of tax breaks and secrecy laws, rather than declaring an honest profit where their economic activity is actually occurring.

    Michael Barnier, European Commissioner

    So what’s changing? A brilliant piece of legislation known as country by country reporting is being introduced right across Europe and is beginning to be implemented in the US. Companies consistently get away with their tax dodging by hiding behind a veil of secrecy. No one knows just how much money they are spiriting away into tax havens, because global accounting standards have only required them to report their operations on a global or regional basis.

    That means Zambia for instance, can’t just look at a company’s books to realise that the majority of their profits are being declared in tax havens while the majority of their activity is occurring in Zambia. Gathering this information is made almost impossible by secrecy laws and super complicated tax arrangements. Company by company reporting would change this. It forces companies to declare, in every jurisdiction that they operate in, vital information like the profits they’re generating, the taxes they’re paying and their staffing levels. It would mean that we could start quickly identifying tax dodgers when we see shonky structures like that of Apple itunes in Europe, which declares almost all its profits in Luxembourg but only has one part time staff member there, no buildings and a single post box.

    The United States took the bold step in 2010 in the wake of the global financial crisis to introduce country by country reporting for all extractive industries (oil, mining and gas) as part of the Dodd-Frank Wall Street Reform Act. Last month Europe moved on introducing country by country reporting on Banks, and last week, they followed this up by extending legislation to the extractive industries.

    In introducing the legislation, the European Commissioner Michael Barnier pointed to “how EU legislation can be a catalyst for change in developing countries”. Amen Barnier!

    Australia though, whilst starting to make progress in the right direction, is dragging the chain. Now is the time for us to jump on board with the international momentum that has been generated and introduce Country by Country reporting here, starting with our extractives – after all, many of the world’s largest mining companies are Australian.

    Country by Country reporting is an idea whose time has come, and we’re asking you to help our Government realise this. You can do this by signing our shine the light petition and getting others to do the same.

    In Other Tax News:

    The OECD has called for submissions on what needs to change in the global tax rules. The Australian Government is in the process of preparing a discussion paper now, and we’re hoping to influence that. We’ll be calling on you in May to join with us and take action! So stay tuned!

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    Gershon Nimbalker is the Advocacy Manager at Baptist World Aid, is a member of Micah Challenge's Campaign Strategy Group and has been helping with our Shine the Light campaign.  Click here to watch the video and get involved in the campaign.