Eurodad: Combat illicit capital flight with financial transparency
This week, Eurodad and its members urged the European Commission to ensure Multinational Companies (MNCs) report their Financial Information on a country-by-country basis to achieve greater financial transparency and impede tax evasion in developing countries.
At present there are no regulations in place to ensure that companies operating in the EU have to disclose financial information broken down to country-level in their consolidated accounts. The result has been illicit capital flight from the poorest countries of the world. However, the Commission is responding to repeated calls for greater transparency, and will release a Communication on the issue in September 2011.
Eurodad’s submission to the Communication highlights the points below:
Country-by-country reporting should have a universal scope and apply to ALL countries in which the company operates.
Country-by-country reporting should be applied to all extractive companies and to large corporations with substantial economic impacts, without imposing additional reporting burdens on small companies.
Harmonised country-specific reporting requirements across all EU member states would greatly contribute to establishing a level playing field for European companies, and to making transparency an international norm.
The country-by-country proposal is designed to simultaneously meet the following purposes:
– be useful for investors and other users of financial statements
– improve tax governance and mitigate tax avoidance and evasion
– fight corruption.
The benefits of the country-by-country reporting proposal outweigh potential costs. While country-by-country reporting may add additional compliance costs, these should not be significant as multinational corporations are likely to already have this data, to be tax compliant.