The Tax Justice Network and the Publish What You Pay coalition are leading an international campaign for Country-by-Country (CbC) reporting by multinational corporations (MNCs).The principles are straightforward.
Nearly two thirds of global trade takes place inside MNCs. By shifting profits between subsidiaries in different jurisdictions, they can dump their costs into high-tax jurisdictions, to be deducted against tax, and shift their profits to tax havens, where they pay little or no tax (we explore this more fully on our transfer pricing page, here). These artificial constructions are invisible in their annual reports, however: under current international accounting rules MNCs are allowed to sweep all their results - profits, tax payments, borrowings, and so on - into a single figure or set of regional figures. So you might get a set of results for "Africa" or "Europe" but it is impossible to unpick these numbers to work out what has happened in each country.
Country-by-country reporting would make MNCs break down their results for each country. 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.
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 an MNC operates in their jurisdictions, let alone what it is doing there. As multinationals grow more complex, the problem is getting worse.
See ten reasons why we want country-by-country reporting, here.
Country by country reporting would involve MNCs disclosing in their annual financial statements:
- The name of each country where it operates
- The names of all its companies in each country
- Its financial performance in each country (sales, purchases, labour costs, employee numbers, financing costs, pre-tax profits, tax charges, costs and value of assets.)
For more details on this, see here.
News and updates on country by country (CbC) reporting
June 1, 2012 - Country by Country reporting: Accounting for globalisation locally. New report by Tax Research.