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Report Charts Multinationals' Transparency On Tax

by Mike Godfrey, Tax-News.com, Washington

17 November 2014


Transparency International has recently released a new report on the tax information disclosure policies of the world's largest multinationals.

The report says that 90 of the 124 companies assessed in the report do not disclose information on the taxes they pay in foreign countries, while 54 disclose no information on revenues derived from those operations.

The report, Transparency in Corporate Reporting, analyzed the world's 124 largest publicly traded companies, whose combined market value is USD14 trillion. The report ranks these companies based on the measures they have in place to prevent corruption and their reporting of information about subsidiaries and holdings and key financial information about overseas operations. The report found that, according to these criteria, UK companies performed the best, while Chinese companies performed the worst.

Introducing the report, José Ugaz, Transparency International Chair, said, "We need more transparency from multinational companies, whose power in the world economy closely rivals the biggest countries. With greater economic power comes greater responsibility. Bad corporate behavior creates the corruption that causes poverty and instability. By not responding to people's demands for greater transparency and accountability, companies risk harming their brand and losing customers."

The report also showed that the world's largest oil, gas, and mining companies are not ready for the country-by-country reporting requirements that they will be obliged to comply with in the European Union from July 2015. These regulations will require extractive companies to report payments such as taxes to Governments, on a country-by-country basis and a project-by-project basis. In the US, Section 1504 of the 2010 Dodd-Frank Act includes similar measures, but implementation has been delayed by an oil lobby lawsuit.

Of the 24 extractive companies in the report who would fall under the new EU and US rules, 19 disclose tax payments and revenue in fewer than half the countries where they operate. Only BHP Billiton, Statoil, and Indian firms ONGC and Reliance disclose tax payments in almost all the foreign countries where they operate.

Ugaz continued: "Companies have to provide more information on their financial operations. Transparency allows citizens to find out the extent of a company's operations in their country. It is also essential to follow money flows between Governments and companies, which can be subject to corruption."

The report also found that technology companies are among the least likely to disclose information about their tax affairs. 44 percent of the firms in the report are based in the US. The report found that only two US companies publish information about tax payments in foreign countries (ConocoPhilips in Canada and Walmart in Chile).

Transparency International Managing Director Cobus de Swardt said: "Tech companies are driving changes that are making our societies more open and accountable. They should be setting an example for other companies on transparency."

"We hope they will live up to the promise of their products and be more transparent about the way they operate."

TAGS: compliance | tax | business | Chile | India | mining | law | enforcement | multinationals | legislation | transfer pricing | Canada | revenue statistics | regulation | legislation amendments | trade | Europe

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