I have drawn attention to the Low Value Consignment Relief (LVCR) VAT abuse perpetrated by the Channel Islands for almost as long as this blog has been in existence, but my efforts pale into insignificance compared to those of Richard Allen.
Richard is an entrepreneur who was manager of Porcupine Tree ( a highly successful UK rock band that just sold out The Royal Albert Hall and Radio City Music Hall in USA), ran a label and also an online retail operation based on the UK mainland. Its business was destroyed by the VAT abuse promoted by the Channel Islands, and tolerated by successive governments in the United Kingdom.
As a result of Richard's work this issue has remained firmly in the public domain, and his ongoing campaign for reform looks increasingly likely to result in change, either because it will be imposed by Europe or because the Treasury will no longer be able to ignore the abuse,and the loss of hundreds of millions of VAT revenue a year that it gives rise to.
In the meantime, Richard has produced a new website highlighting the issues involved and I strongly recommend it to all with concern about organised, government-sponsored, tax abuse. It's not just Richard though. The site has backing from the cosmetics, ink cartridge, memory card and car parts industry involved as well as the backing of a number of major music industry trade organisations.
It's a highly professional looking site:
Strongly recommended to all with concern on this issue.
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Hello Richard, following on from John Christensen’s piece, I’m assuming you’ve seen this consultation from the EC? Just thought I’d flag in case not,
Best wishes,
Hugh Wheelan, Editor, Responsible Investor
http://ec.europa.eu/internal_market/consultations/2010/financial-reporting_en.htm
INTRODUCTION
The Services of DG MARKT are conducting a public consultation in order to gather stakeholders’ views on country-by-country reporting by multinational companies. Country-by-country reporting is a concept that would require multinational companies to disclose financial information [1] on their operations in third countries[2] in their annual financial statements.
At present, issuers of securities in regulated markets in the EU[3] are required to make public an annual financial report comprising, inter alia, a management report and the audited financial statements (cf. Article 4 of Directive 2004/109/EC)[4]. When the issuer is required to prepare consolidated accounts, the audited financial statements must comprise consolidated accounts drawn up accordance with international accounting standards (cf. Regulation (EC) No 1606/2002). Currently, the applicable accounting standards do not require issuers to disclose financial information on a country-by-country basis in their consolidated accounts, although the Accounting Directives do require issuers to identify subsidiaries, jointly controlled entities and associates[5]. Moreover, non-listed limited liability companies registered in the EU (including subsidiaries of listed companies), are required to file their annual accounts with the business registries, which are accessible to any interested party[6]. Similar obligations exist in many third countries.
POSSIBLE WAYS OF ENSURING ADDITIONAL TRANSPARENCY
In recent years there have been calls to impose on large companies (whether listed or unlisted) operating in third countries additional transparency requirements linked to these activities in third countries. In some cases, these calls concern a particular industry sector.
In a more general context, the Commission, on 22 September 2010, agreed with the European Parliament in the context of the negotiations of the new supervisory package “to prepare a Communication evaluating the feasibility of requesting certain issuers of shares whose securities are admitted to trading in a regulated market and which prepare consolidated accounts, to disclose in the annual financial report, key financial information regarding their activities in third countries.”
Broadly speaking, two types of disclosure could be considered in this context:
1) General country-by-country reporting by multinational companies.
The main goals of such disclosure would be: (a) to help investors to better assess the different national activities of multinational companies; and (b) to enhance transparency about capital flows, for instance, to better enforce tax rules. Certain steps have already been taken to this end:
The Commission Communication on Tax and Development: Cooperating with Developing countries on promoting good governance in tax matters (COM(2010)163 final) of 21 April 2010, aims to improve synergies between tax and development policies.
Recent Foreign Affairs Council conclusions of 14 June 2010 encouraged the EU and its Member States to work towards “exploring country by country reporting as a standard for multinational corporations, by encouraging the OECD to pursue its work on country-by-country reporting, including as regards the OECD Guidelines for Multinational Enterprises and in its Principles of Corporate Governance and on propriety, integrity and transparency in the conduct of international business and finance. In addition, Member States should support ongoing consultation work by the IASB (International Accounting Standard Board) on a country-by-country reporting requirement in IFRS 6 (International Financial Reporting Standard 6) for the extractive sector, and encourage the IASB to look beyond the extractive sector.”[7]
2) Specific transparency obligations for companies which are active in the extractive industry (minerals, oil, and gas)[8] in third countries.
The main goal of such disclosure would be to provide more transparency about the payments made by the extractive industry to governments in third countries. In this context, it may be noted that Section 1504 of the US Dodd-Frank Act (which was adopted on 21 July 2010), requires all extractive companies (e.g. minerals, oil, or natural gas) listed on US stock-exchanges to publish payments made to governments on a country-by-country basis[9]. Some EU based companies active in the extractive industry are listed in the US and will therefore in the future be subject to this Act. Moreover, the IASB (International Accounting Standard Board) is currently working on a possible country-by-country reporting requirement which could be incorporated within a replacement Standard for IFRS 6 (International Financial Reporting Standard 6) for the extractive sector. Once finalized, this standard is likely to become mandatory in the EU through the usual endorsement process under the IFRS Regulation.
FOLLOW UP OF THE CONSULTATION
The following questions are aimed at gathering reactions and insights from stakeholders as well as quantitative and qualitative evidence on the impact, costs and benefits relating to the issue of country-by-country reporting obligations.
NOTE: Contributions received and the identity of the contributor will be published on the internet, unless the contributor is opposed to the publication of personal data for fear that this would damage his/her legitimate interests, in which case the contribution may be published anonymously. Otherwise, the contribution will not be published, and its content will not be taken into account. It is important to read the specific privacy statement attached to this consultation for information on how your personal data and contribution will be dealt with.
@Hugh Wheelan
Indeed yes
And we will be submitting
I will publish a submission well before the due deadline