The annual reports of a transnational corporation (TNC) contain a wealth of economic and financial information: its profits, revenues, taxes, borrowings, employees, and so on. Yet under current international rules TNCs are generally allowed to sweep all these numbers into global or regional figures. So you might get a set of results for “Africa” or “Europe” or “World” – but it is impossible to unpick these numbers to work out what has happened in each country.
Country-by-country reporting would make TNCs break down their results for each country. This is, at heart, a transparency requirement. This is essential: the country is the basic democratic unit, and the citizens of each country need to know what TNCs and their affiliates are doing there.
Country-by-country reporting would require each transnational corporation to provide the following information:
(1) The name of each country where it operates.
(2) The names of all its subsidiaries and affiliates in these countries.
(3) The performance of each subsidiary and affiliate, without exception.
(4) The tax charge in its accounts of each subsidiary and affiliate in each country.
(5) Details of the cost and net book value of its fixed assets in each country.
(6) Details of its gross and net assets for each country.
These criteria could be adapted to fit a formula under unitary taxation.
What is more, country by country reporting would shine light on many of TNCs’ international tax shenanigans. When they manipulate transfer prices to shift billions of dollars into zero-tax havens, for example, country by country reporting would make this very clear.
It would not be unduly onerous – companies typically do this for internal purposes anyway – the World Bank, for instance, agrees that the benefits would outweigh the costs, and strongly supports the initiative overall. Because most countries use International Accounting Standards, this would be an extremely cost-effective route to creating a large step change in global corporate transparency for the benefit of citizens, tax authorities, investors, economists, and many others. It could be adapted to fit a formula under unitary taxation.
Country by country (CbC) reporting would provide benefits well beyond the arena of tax. Currently, citizens cannot use corporate published accounts to establish even whether a TNC operates in their jurisdictions, let alone what it is doing there. As transnational corporations grow more complex, the problem is getting worse.
Highlights
Richard Murphy on country by country reporting. From the pioneer of the concept.
June 1, 2012 – Country by Country reporting: Accounting for globalisation locally. New report by Tax Research.
Nov 21, 2011 – Exposing the lost billions: How financial transparency by multinationals on a country by country basis can aid development – Eurodad. Full report here.
May 2013 – From January 2003 to May 2013 – progress with country-by-country reporting – Tax Research
See also our Country by Country Reporting archive.
Stories before 2014
May 28, 2013: Country by country reporting: the first people-led accounting standard. On the EU adopting new CbC requirements, 10 years after TJN began its campaign.
March 27, 2013 – No More Shifty Business: a response to the OECD’s BEPS report on global tax. TJN and other groups expand the scope of calls for country-by-country reporting, to include the notion of Combined Reporting (see Transfer Pricing Page for details of that.) Original document here.
Nov 1, 2012 – At last, the accountancy profession starts to take country by country reporting seriously
June 1, 2012 – Country by Country reporting: Accounting for globalisation locally. New report by Tax Research.
May 17, 2012 – Oxfam America sues SEC to force completion of Dodd-Frank oil transparency rule. Original here
May 9, 2012 – Bishops call for country by country reporting. Originals in English, French,Spanish.
May 8, 2012 – Tax journalist endorses CbC reporting. Original here.
May 2, 2012 – Richard Murphy speech on why we need CbC reporting
Feb 2012 – The Financial Times endorses CbC reporting. Original here.
Feb 6, 2012 – Barclays’ refusal to disclose location of tax losses: a case for CbC reporting.Original here
Nov 2011 – Exposing the lost billions: How financial transparency by multinationals on a country by country basis can aid development – Eurodad. Full report here.
Sept 20, 2011 – Piping Profits: Mapping the Extractive Industries corporations. Original here.
Sept 2011 – EU asks IASB to change its approach
Aug 4, 2011 – Nine French Regional Councils Ask For Country-By-Country Reporting From Financial Partners
July 19, 2011 – Christian Aid welcomes UK government support for CbC reporting
July 13, 2011 – Senator Levin’s landmark Stop Tax Haven Abuse Act – the CbC clause. Original bill here.
July 1, 2011 – Netherlands supports CbC
June 16, 2011 – 15,000 Norway signatures on tax havens, CbC
May 17, 2011 – Natural resource transparency: call for urgent EU action – Publish What You Pay
May 2, 2011 – US companies already have all the data they need for CbC reporting
March 16, 2011 – TIEAs a step closer in Norway
March 16, 2011 – Partial victory: European ministers support country-by-country reporting –Eurodad
March 4, 2011 – EU going for Dodd-Frank plus?
Feb 3, 2011 – Private companies say “financial transparency: not a great idea” – Eurodad
Dec 22, 2010 – FT links country-by-country reporting to formulary apportionment – supports both.
Dec 16, 2010 – TJN submission to the European Union on CbC reporting
Nov 2010 – Shifting sands: tax, transparency and multinational companies – Christian Aid
Sept 1, 2010 – Country by County Reporting: Dodd-Frank in multiple languages (legislation here).
July 30, 2010 – World Bank submission to the International Accounting Standards Board (IASB.)
May 2010 – Accountancy briefing: the benefits of country-by-country reporting
May 2010 – Accountancy briefing – who are the users of accounts?
June 2009 – detailed report on CbC reporting for the Task Force on Financial Integrity and Economic Development
