How country-by-country reporting by oil, gas and mining companies can help change the world

Publish What You Pay campaigns globally for rules requiring companies to disclose, country-by-country and project-by-project, how much they pay to governments in each country where they operate. We support new reporting rules being introduced in the US and EU.

The problem

Exports of oil, gas and minerals are a vital source of income to developing countries, potentially generating hundreds of billions of dollars in taxes and revenues that could be used to combat poverty and drive economic and social development. Currently, lack of reliable public information about the flow of revenues to governments from extractive companies makes it impossible for citizens and civil society to monitor the money and prevent it being embezzled by corrupt officials.

Lack of transparency also enables multinational companies to avoid and evade taxes due to developing country governments. This contributes to the drain of capital from these countries, estimated at more than US$1 trillion a year – far more than inflows from foreign investment and aid.

Many developing countries have failed to turn natural resource wealth into lasting benefits. Countries like Nigeria and the Democratic Republic of Congo are far poorer, less stable, less hospitable to foreign investment, and more aid-dependent than they should be.

For investors, a lack of accurate and timely information about payments to governments from extractive companies, especially at project level, weakens stewardship and capital allocation decisions, reduces benefits and raises costs.

How country-by-country reporting will help

The starting point for tackling corruption, fraud and poor governance in the natural resource sector is transparency. Citizens, civil society and investors need detailed reliable financial information to monitor governments and companies and hold them to account for the exploitation of finite resources. The information needs to be comparable for tax authorities to monitor what international companies should pay, civil society to hold duty-bearers to account, and investors to assess country- and project-specific risks.

The amounts of money at stake are potentially transformational. In 2008 exports of oil and minerals from Africa were worth roughly $393.9 billion, nearly 9 times the value of international aid to the continent and over 10 times the value of exports of agricultural produce.

Good for governments, business and poverty reduction

• Transparency reduces corruption and costs of capital for developing countries and encourages foreign direct investment.
• Companies can provide clear evidence of how they contribute to government revenues and communities.

• Aid budgets will go much further once developing countries achieve sustainable growth by better mobilising and managing their own natural resources.

• Reducing conflict in resource-rich countries is important for stable energy and minerals supplies.

• Transparency fosters a stable investment and business climate, informs investors’ risk assessment and stewardship, favours the best companies and deters less scrupulous competitors.

• Transparency enables citizens to hold governments and business to account, ensuring that natural resources generate benefits for the whole population.

Potential impact in Africa

Africa is experiencing a major expansion in natural resource extraction that should generate revenues on a scale to drive investment and economic diversification and help meet the Millennium Development Goals. But this will only happen with corporate transparency. Research by ActionAid, Christian Aid and partners demonstrates that mining in Africa is systematically under-taxed, as a result of tax avoidance and evasion, discretionary and opaque concessions, and poorly designed tax exemptions (Breaking the Curse, 2008). Zambia’s most recent EITI report shows that less than half the country’s mining companies paid corporation tax in 2008.

Progress to date

• The Extractive Industries Transparency Initiative (EITI), launched in 2002, is now implemented in 35 countries, with the US the latest country due to implement.

• Since 2010 mineral companies listing on the Hong Kong Stock Exchange must disclose country-by-country information on tax, royalty and other payments to host governments.

• Implementation of the 2010 US Dodd-Frank Wall Street Reform and Consumer Protection Act (Section 1504) will require all US-listed oil, gas and mining companies to publish their payments to foreign governments on a project- and country-specific basis.

• In October 2011 the European Commission published proposals to revise the EU’s Transparency and Accounting directives to require all EU-listed and large unlisted extractive and timber companies to publicly disclose payments to governments worldwide.