Exploring the effectiveness of EU law concerning payments to governments reports

The EU’s requirements for country-by-country reporting of payments to governments by oil, gas and mining (extractive) and forestry companies consist of the Accounting Directive’s Chapter 10 provisions and the equivalent provisions of the Transparency Directive (collectively ‘the Directives’). The provisions require in-scope companies in the extractive and forestry sectors to publicly report details of payments they make to governments on an annual and per-country basis, including at project level.

The reasoning behind the provisions was that by increasing transparency concerning substantial payments made to governments of resource-rich countries by significant corporations in the extractive and forestry sectors, these governments would become more accountable for the usage of the revenues they receive. The need for greater accountability arises from the concern to see improved socio-economic development of these countries. Hence, the provisions could help overcome the ‘resource curse’.

The provisions require that payments be broken down: into categories such as taxes, royalties, bonuses and licence and other fees as well as on a country-by-country basis and into payments made in respect of specific projects as well as entity-level payments such as corporate income tax. The Chapter 10 provisions apply to companies registered within EU Member States. The Transparency Directive provisions apply to in-scope companies from both within and outside of the EU, listed on EU-regulated stock exchanges.

The study reported here follows on from an earlier study into the early transposition and implementation in the UK of the provisions of the Directives (Chatzivgeri et al., 2017).

Read the Executive Summary here.

A report prepared by the STAR Collective, an academic group from across the EU acting to enhance SOCIAL well-being through TRANSPARENCY and ACCOUNTABILITY RESEARCH.

Beyond Transparency Investigating The New Extractive Industry Disclosures

Originally posted on Oxfam’s website

In 2016, French companies extracting natural resources in developing countries made their payments to the governments of these countries public for the first time, detailing the payments for each of their projects. This is a significant step forward in terms of transparency in a notoriously opaque sector.

Nevertheless, while the stated objective of these measures is to facilitate public understanding and monitoring of the activities of companies exploiting natural resources, this report reveals various limitations, such as regarding access to the new data, which remains complicated, particularly for non-specialists. Lack of contextual data surrounding the disclosure of payments makes understanding the data even more difficult. Furthermore, loopholes in the Directives and their transposition into French law also limit possibilities of studying and comparing the different payments.

However, the disclosure of payments to governments shows that the governance of the sector is improving. This report demonstrates how the disclosure of this new information helped inform analysis of the activities of the French oil company Total in Angola and the French uranium giant Areva in Niger.

Improving transparency in the European Union’s oil, gas and mining sectors

In 2013, the European Union (EU) passed new transparency legislation requiring large oil, gas, mining and logging companies listed and registered in the EU to disclose their revenue payments to governments around the world. The EU Accounting Directive requires reporting of EU-registered companies’ payments to governments on a country-by-country and a project-by-project basis (for each country a company operates in and for each project to which payments have been attributed) as does a similar provision in the EU Transparency Directive for publicly listed companies. This includes disclosure of taxes paid, production entitlements, royalties, bonuses and other payments of EUR 100,000 and over. Thanks to this legislation, similar laws have been adopted in non-EU countries,
including Norway and Canada, while similar draft legislation is currently being considered in Switzerland and Ukraine and has been pledged by Australia’s major opposition party, and a mandatory reporting law in the United States awaits the Securities and Exchange Commission (SEC)’s implementing rule.

The EU Accounting Directive has now been transposed into national law by all EU Member States. Early adoption by France and the UK means that global companies such as Shell and Total published their first reports in 2016, while the majority of European companies began reporting in 2017.

In 2018, the European Commission (EC) will review Chapter 10 of the Accounting Directive – the section setting out the requirements for “payments to governments” reporting by extractive companies.

This briefing paper has been prepared by members and civil society allies of the Publish What You Pay coalition in order to strengthen EU policy on promoting transparency and accountability in the extractives sector through the review of Chapter 10 of the Accounting Directive and Article 6 of the Transparency Directive. It outlines the main achievements of the existing transparency legislation for the extractives sector as well as its loopholes, and sets out recommendations for the EC’s review.

Taking away the tax effect of tax havens

Cross border taxation methods and reverse tax credit

This report introduces the reader to a much-neglected area of international taxation, tax credits, and shows how a more active utilization of tax credits and one of its accompanying features, withholding tax, can fix some of the issues we have with multinational companies not paying taxes.

In addition, the report shows how by reversing the principles of tax credits and applying them unilaterally to cross-border transactions on the cost side, one is able to effectively negate the negative effects of multinational companies not paying taxes.
An application of reverse tax credits on cross-border transactions can effectively restore the taxation of multinational companies to where it does not matter whether the companies use low- or no-tax jurisdictions anymore.

This report is thus about increasing the international tax toolbox, and reversing the situation where countries feel they have to participate in the downward spiral of tax competition. It shows that by tweaking international tax mechanisms, it is possible to unilaterally fix the tax situation of many multinational companies.
Reverse Tax Credit is for application with subsidiaries in a country with cross-border cost transactions, while a more active application of withholding tax and tax credits works wonders with cross-border transactions without active representation in the country.

Case study: Sapin II: a very opaque transparency bill in France

Between 2012 and 2014, France was considered a champion of corporate transparency by its European peers. In 2013, the French Parliament passed a law setting a public country-by-country reporting (CBCR) for banks which likely influenced the vote for the EU Capital Requirements Directives (CRD) a few months later. Public CBCR is widely seen as an efficient way to monitor tax strategies of multinational companies, forcing them to disclose information on their operations (turnover, profits, taxes, subsidiaries, etc) on a country-by-country breakdown (including tax havens). In 2014, France was one of the first countries to transpose the EU Transparency and Accounting Directives, setting up public reporting for extractive companies, different from CBCR but equally useful, commonly known as Payment to Government reporting (PtG reporting).

However, despite promises from various government members and President Hollande himself, the extension of public CBCR to cover all large multinationals was never voted in Parliament. In mid-2016, in the aftermath of the Panama Papers, the French government introduced a new bill on transparency, the anti-corruption fight and the modernisation of economic life, commonly known as the “Sapin II bill”. Initially reluctant to establish a public CBCR, the government eventually backed down and introduced a watered down version of the measure.

In this case study, part of the PWYP Data Extrators, PWYP France Coordinator Quentin Parrinello used data-driven stories to outline how proposed changes to Payment to Government reporting would have allowed companies such as Total to hide a large part of their activities.

Case study: Using UK company data as an accountability tool

After well over a decade-and-a-half of campaigning by the Publish What You Pay (PWYP) anti-corruption movement, oil, gas and mining companies are starting to report payments to governments under long-awaited mandatory disclosure rules. By 2019 an estimated 84% or more of the world’s 100 largest oil and gas companies, and at least 58% of the largest 100 mining companies,
will be required by law to disclose their payments. The global extractives transparency standard will have well and truly arrived.

Getting oil, gas and mining companies to publish their payments to governments is necessary to deter corrupt deals and poor revenue management. But resulting CSV files and data-filled company PDFs are not
always the best tools for citizens and civil society to use when discussing payments or questioning government officials. That is why data infomediaries are needed to work with the data to enable citizens and civil society to assess company reports.

In this case study, part of the PWYP Data Extrators, PWYP UK Coordinator Miles Litvinoff highlights how:

  • Civil society in host countries has used, or plans to use, data reported by UK companies under the EU Directives to proactively ask government entities to account for key payments disclosed by foreign extractive companies.
  • Unlike in the EITI process, payments in question were made no more than one year ago, which significantly enhances accountability.
  • Using mandatory payment disclosures, and supported by open data techniques and products, five PWYP country coalitions will have initiated dialogue with government entities in four host countries and with international extractive companies including Shell on the comprehensiveness of company disclosures, on what constitutes a “fair deal” for citizens and on host government accountability.
  • Achieving Extractive Transparency in the European Union

    The European Union’s (EU) 2013 amendments of its Accounting Directive and Transparency Directive to require oil, gas, mining and forestry companies to report their payments to governments on a country-by-country and project-by-project basis were achieved after more than ten years of international advocacy and campaigning by the global Publish What You Pay (PWYP) coalition. Compared with many civil society campaigns, PWYP’s advocacy in the EU was unusually successful in resulting in legislation that embodied most, if not all, of the coalition’s key policy demands.

    This case study seeks to identify the elements of the campaign that were central to its success. It draws on interviews with fourteen people who were involved, most of them closely, in PWYP’s push for mandatory extractive industry reporting in the EU. Thirteen of the interviewees worked then, or work now, for the PWYP International Secretariat, country coalitions or coalition member organisations, while one – former Member of the European Parliament Arlene McCarthy – became effectively PWYP’s champion through her work on the Parliament’s Legal Affairs Committee. The author of the study, who undertook the interviews, has coordinated PWYP’s UK country chapter since October 2011.

    Accounting and Transparency Directives: key issues in transposition

    The EU Accounting and Transparency Directives will require oil, gas, mining and logging companies to publish payments made to governments for access to natural resources. EU Member States have until 2015 to pass implementing legislation to bring payment reporting into law.

    In the UK, the Department of Business, Innovations and Skills (“BIS”) has adopted regulations implementing the Accounting Directive (“AD”), while the Treasury and the Financial Conduct Authority will implement the Transparency Directive (“TD”) this month.

    This note aims to share our experience of UK implementation and provide a checklist of issues that all implementing regulations must address. To protect the emerging global standard of payment reporting, implementation must be consistent across EU Member States, avoiding legislative errors which could be open to challenge in Court.

    Fact Sheet on EU Accounting and Transparency Directives

    In June and November 2013 the EU adopted amendments to the Transparency and Accounting Directives that oblige all listed and large non-listed extractive companies in the EU to publish the payments they make at project-level in the countries where they operate.

    This fact-sheet includes the technical details about these rules.

    Testing the PWYP coalition model

    The Overseas Development Institute carried out a study testing PWYP’s coalition model. Below is the introduction, click here to read the full report.

    Introduction

    Since its inception in June 2002, the PWYP campaign coalition has grown from a few UK-based organisations to become a global network of more than 700 organisations in almost 60 countries organised into a fairly loose alliance of affiliated national coalitions. Some of these coalitions share the same PWYP brand and logo, while others have distinct and independent identities. All, however, share the same status of affiliation, without differentiation.

    With the growth and evolution of the global campaign has come two particular challenges. Firstly increasing demands on the international secretariat for coordination and support to national coalitions far outstrip its current capacities. Secondly, despite the important achievements of the campaign at the international level, national coalitions continue to face numerous operational challenges, which undermine their effectiveness to advance the advocacy agenda at national level. These problems are to be found at different levels and to differing degrees, though they are present in almost all coalitions in the resource-rich countries.

    With this in mind, this study has two primary objectives:

    1.     To test the organisational theory of change (“the coordinated, collective actions of a diverse coalition of organisations will be most effective in driving policy change for greater extractive industry transparency”) and assess the extent (and where, why and how) to which this theory has been proven at national level (or not).

    2.     To assess the operational difficulties of coalitions and to recommend good practices for how coalitions can best be managed and supported.

    The study began with a review of 10 country coalitions, selected in consultation with the International Secretariat: Ghana, Niger, Mongolia, Kyrgyzstan, Nigeria, Chad, Indonesia, Australia, US and UK. Of the ten countries, field trips were conducted in first four while the remaining six were studied remotely through telephone interviews. 

    After preliminary analysis of the country reviews, a number of common themes were identified.  These were tested across a wider sample of opinion through a Delphic consultation conducted through two mechanisms at the PWYP conference in Amsterdam in 2012 – an instant vote system of up to 100 delegates within a session at the conference, and distribution of a paper questionnaire to all participants who were then able to answer on paper or online. The survey received 54 responses.

    Read the rest of the report.