As the Wall Street Journal has reported:
WASHINGTON–Some of the biggest U.S. companies, including Google Inc. and FedEx Corp., have quietly removed hundreds of offshore subsidiaries from their publicly disclosed financial filings over the past several years.
Software maker Oracle Corp., for instance, disclosed more than 400 subsidiaries in its 2010 annual report. By 2012 the list had been whittled to eight–five of which were located in Ireland. Oracle declined to comment.
The vanishing subsidiaries don't stem from asset sales or corporate restructuring. Companies across industries say they are taking advantage of Securities and Exchange Commission rules that demand disclosure only when subsidiary operations are "significant."
Financial opacity is increasing, but the more companies do this the more they make the case for country-by-country reporting, which would require the disclosure of every subsidiary and what it does.
And in the meantime I thnk t should be law that the accounts of every subsidiary of every UK company should be on UK public record. Can anyone think of a single good reason why not?
Hat tip: Nick Shaxson
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Frankly, I do want to see a vast number of those subsidiaries disappear. A large number of them exist purely to exploit some piece of legislation that was never intended to apply to the group overall, but by massaging the corporate structure, a company can be created to gain an advantage in the tax position. The substance of the group’s operations has not changed, but somehow the company pays less tax.
Even well-known structures such as the holding company should be challenged. It’s common for even small businesses to be organized into holding company, which doesn’t perform any business function, plus operating company, which does the work. I find that very hard to understand. (My own employer somehow played a shell game last year in which the identities of the holding company and operating company were switched round, which I really don’t get: why was it done, and more to the point, why was it permitted?)