The European Union is undertaking a consultation on country-by-country reporting, the closing date for submissions being 22 December.
At their request I have prepared a quite lengthy submission which elaborates and advances the case for country-by-country reporting by multinational corporations in a number of significant ways. This has been published by the Tax Justice Network:
As the summary says:
This report is a full response to the questions posed by the European Commission in public consultation on country-by-country reporting by multinational companies, published in October 2010. The submission elaborates the summary responses posted on line to the European Commission and is an integral part of the overall submission.
In summary the submission argues that:
¬? Country-by-country reporting is financial reporting data;
¬? Country-by-country reporting data is essential information likely to have significant impact on economic decision making by investors and other users of financial statements;
¬? As such country-by-country reporting requirements should be included in International Financial Reporting Standards, or failing that in the European Union Seventh Directive on Financial Reporting;
¬? This information is material without exception for the users of financial statements located in the jurisdictions in which multinational corporations trade (as indicated by their having a taxation permanent establishment in that location) and as such must be published for all such jurisdictions, with the sole exception being that some trading data may be omitted when immaterial to the jurisdiction in question.
¬? Most country-by-country reporting data should be audited but this should not impose significant additional cost on multinational corporations, all of whom must already have all the necessary data if they are to fulfil their legal obligation to maintain adequate internal control systems capable of determining their assets and liabilities at any point in time.
¬? Country-by-country reporting data would substantially enhance taxation governance within multinational corporations, jurisdictions and internationally;
¬? There are significant benefits to full country-by-country reporting for the extractive industries and that this requirement complements and does not in any way undermine the disclosures required by recent US legislation and the Extractive Industries Transparency Initiative.
¬? Whilst country-by-country reporting by all multinational corporations would be invaluable, greatest benefit is secured from this disclosure by what are defined as â€šÃ„Ã²very large’ corporations and some other quoted companies.
¬? That all these users need country-by-country reporting data because this data;
o Adds essential information for the effective operation of capital markets to that available in existing financial statements.
o Emphasises the duty of directors to exercise sound governance over the assets of which they have stewardship, including the decisions they make as to where to invest those assets and to undertake trade.
o Ensures that all users of accounts receive the information that they require to appraise the performance of the reporting entity.
o Provides essential information required by users of accounts which is not made available by existing International Financial Reporting Standards.
o Provides that information, if delivered consistently across Europe, on as basis that ensures that comparison can be made between reporting entities, which is a key attribute essential to successful interpretation of financial data.
o Will increase the well-being of the people of Europe as a consequence of the enhanced return likely be made when directors of multinational corporations are held accountable for locating corporate investment in those places where their use is likely to be most advantageous.
We would, of course, be delighted if people would like to support this submission.