{"id":14167,"date":"2012-02-20T11:41:22","date_gmt":"2012-02-20T11:41:22","guid":{"rendered":"http:\/\/www.taxresearch.org.uk\/Blog\/?p=14167"},"modified":"2012-02-20T08:50:00","modified_gmt":"2012-02-20T08:50:00","slug":"why-country-by-country-reporting-by-multinational-corporations-matters","status":"publish","type":"post","link":"https:\/\/www.taxresearch.org.uk\/Blog\/2012\/02\/20\/why-country-by-country-reporting-by-multinational-corporations-matters\/","title":{"rendered":"Why country-by-country reporting by multinational corporations matters"},"content":{"rendered":"

I wrote earlier today <\/a>about the arguments now going on in the EU about introducing\u00a0country-by-country reporting for the extractive industries.<\/p>\n

I have to say I am not objective on this issue since I created the concept of\u00a0country-by-country reporting in 2003<\/a>, but I\u00a0maintain\u00a0- and\u00a0thousands\u00a0of\u00a0others\u00a0who have\u00a0campaigned\u00a0tirelessly for\u00a0country-by-country reporting in all of Europe's major development NGOs\u00a0maintain\u00a0that country-by-country reporting (CbC) is important for the following reasons:<\/p>\n

1. Transparency matters.<\/strong> In many countries a corporation does not have to put its\u00a0accounts on public record. That means that what an MNC does in that country is not a\u00a0matter of public record. That matters. What MNCs do has enormous implication for the\u00a0wellbeing of the world: CbC overcomes this problem. It puts all MNC activity \u2018on the\u00a0record\u2019. Many investors appreciate this.<\/p>\n

2. Corporate social responsibility (CSR) matters.<\/strong> CSR is about the relationship\u00a0between a company and its host community. But this does require that the host\u00a0community knows the company is there. CbC reporting provides that information.<\/p>\n

3. Accountability matters.<\/strong> A company cannot be accountable unless it can be identified.\u00a0This means that the names an MNC uses locally must be on public record. Too often\u00a0they are not. CbC reporting names local subsidiaries.<\/p>\n

4. Trade matters.<\/strong> At least 60% (and maybe more) of world trade is intra-group. In other\u00a0words it takes place across national boundaries but between companies under common\u00a0ownership or control. Existing MNC accounts completely eliminate all of this trade from\u00a0public view. CbC shows it all. This is vital if trade relationships are to be understood,\u00a0and made fair.<\/p>\n

5. People matter.<\/strong> MNC accounts include statements on the number of employees a\u00a0company has and their aggregate remuneration. CbC would require this statement for\u00a0every country in which an MNC operates. This would provide invaluable information on\u00a0labour conditions.<\/p>\n

6. Tax matters.<\/strong> MNCs have more opportunity than any other group in a society to plan\u00a0their tax affairs. They can seek to shift their profits from state to state to find the lowest\u00a0overall bill. CbC discloses the profits that companies record in each country in which\u00a0they operate and the taxes that they pay on them. This means they can be held\u00a0accountable for what they do and do not pay. It\u2019s estimated that if this problem were
\ntackled enough tax could be collected to pay for the Millennium Development Goals.<\/p>\n

7. Corruption matters.<\/strong> The Extractive Industries are dominated by MNCs. The\u00a0Extractive Industries Transparency Initiative seeks to hold those companies to account\u00a0for the tax payments they make, and the governments that receive those payments to\u00a0account for what they do with them. Many MNCs resist disclosure of information on\u00a0what they pay because of competitive pressure, contractual obligations and local political
\nopposition. CbC would overcome these objections, significantly enhancing transparency\u00a0in this sector, and help cut corruption.<\/p>\n

8. Development matters.<\/strong> Developing countries lack revenue to finance public goods\u00a0and services. Aid helps alleviate this problem but creates a dependency, harms the\u00a0democratic accountability of developing country governments because they aren\u2019t\u00a0accountable to their electorates for what they spend and aid can itself directly\u00a0contribute to corruption. Local declaration of economic activity by MNCs with the\u00a0resulting accountability for taxes paid could break this cycle and help create fully\u00a0independent, accountable governments capable of raising their own taxation revenues.<\/p>\n

9. Governance matters.<\/strong> Many of the major corporate scandals of recent times have\u00a0involved extensive use of offshore subsidiary companies. These are becomingly\u00a0increasingly common throughout the MNC world, but it is recognised that the problem\u00a0of managing them creates severe governance issues for MNCs. This results in increased\u00a0risk for shareholders and others who need to understand the risk inherent in an MNC\u2019s
\nactivity.<\/p>\n

10. Where you are matters.<\/strong> Some countries are politically unstable. If a company trades\u00a0there shareholders should know. Some are politically unacceptable. If an MNC trades\u00a0there civil society wants to know. Some countries are subject to sanction. Trading there\u00a0is illegal. Where you are matters. CbC holds a company to account for where it is.<\/p>\n

The EU is now considering the implementation of\u00a0country-by-country reporting: please\u00a0support\u00a0the campaign to\u00a0introduce\u00a0it. You can do so by supporting\u00a0Publish What You Pay and many of its members who are committed to the campaign,\u00a0including\u00a0Christian\u00a0Aid and Action Aid.<\/p>\n","protected":false},"excerpt":{"rendered":"

I wrote earlier today about the arguments now going on in the EU about introducing\u00a0country-by-country reporting for the extractive industries. I have to say I
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