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.

Join the hearing on extended country-by-country reporting this summer

This article was originally posted on the PWYP Norway website

There are mechanisms against the Panama leak. The Ministry of Finance is scheduling the most important hearing which can give transparency into companies for “summer.”


Rasmus Hansson from MDG (Environmental Green Party) is tired of The Ministry of Finance wasting time.

Hansson refers to the Conservative Party’s of Norway (Høyre) national congress where recently a statement was made concerning “a strengthened fight against tax evasion” while at the same time the Government has been slow to introduce the most important step towards stopping potential tax evasion.

In a written inquiry to the Finance Minister on April 21 Hansson referred to the Panama leak and wrote that it is urgent that the demands for extended country-by-country reporting (ECBCR) be implemented, and that the Government must accommodate an extended country-by-country reporting posthaste.

Hansson asks: Will the Finance Minister promote a hearing note concerning country-by-country reporting under the accounting law §3-3d during Parliament´s spring session?

Read: written question and reasoning (dokument nr. 15:955 (2016-2016) (In Norwegian)

The Finance Minister is “currently considering changes”

The Ministry of Finance writes “the Ministry is also considering changes in the CBCR regulations in keeping with Parliament´s request, with the goal of sending the hearing note to hearing during the summer of 2016.” (Translated by PWYP Norway)

The Ministry of Finance also writes that they are “currently working to initiate the coming evaluation of the CBCR regulations, so that this can be completed at the latest in the spring of 2017.” (Translated by PWYP Norway)

All measures have not been taken

The Ministry of Finance has yet to follow up Parliament´s request agreement in June 2015 (nr. 792 (2014-2015)). The Ministry of Finance has sent out other hearings and there have been several statements and misunderstandings tied to two completely different tracks for transparency.

There has been confusion concerning two different initiatives for dissimilar ends which have almost the same names: “Country-by-country reporting” and “country-by-country reporting for tax purposes.”

Read and understand the important differences between BEPS, CBCR, and ECBCR: “Parliament asked for ECBC-reporting. The Ministry of Finance offered BEPS.”

CBCR is not CBCR

“Country-by-country reporting” (CBCR) is the law which can be strengthened to become “extended country-by-country reporting” (ECBCR). Then the amendment can become effective against potential tax evasion. What remains is that only accounting figures should be reported and nothing else. In addition all expenses must be reported because it is easy for companies to manipulate the expenses. Finally, notes have to be declared in the annual accounts, so that it can be matched accurately with other company information, and is published for all countries, including tax havens.

“Country-by-country reporting for tax purposes” (BEPS) is something different. It is OECD´s suggestion that a diminished type of information with poor data basis, should be reported only to tax authorities. That information could be based on any type of data basis in the company, there are wide gaps for interpreting which parts companies wish to report, there is no transparency concerning expenses, and information is closed except to tax authorities. Accordingly, OECD has received much criticism from civil society in using this designation in this proposal.

The Government has unfortunately contributed to the confusion. They have referred to CBCR and given the impression that the initiative has already been implemented. It has not.

The hearing on CBCR for tax purposes (that is to say BEPS) does not follow up Parliament´s request agreement to strengthen CBCR (along with ECBCR). The Ministry of Finance has yet to follow up the Parliament request tied to the accounting law §3-3d and the Securities Trading Act §5-5a which could strengthen the country-by-country amendment, regardless of the BEPS hearing.

Read: ”Siv Jensen’s evasions”.

In the article “This year it will become more difficult to hide money in tax havens” (translated by PWYP Norway) (you can read the article in Norwegian here: I år blir det vanskeligere å skjule penger i skatteparadis) a State Secretary in the Ministry of Finance gave a statement to the newpaper concerning “country-by-country regulations” and the hearing deadline which expired in January 2016, but this is about “country-by-country reporting for tax purposes.”

Can making BEPS publicly available threaten ECBCR?

Siv Jensen further writes in her response the following with regards to the BEPS process “influencing” the CBCR process:

“In closing, I want to reference that the EU commision on April 12, 2016 submitted a proposal concerning public country-by-country reporting for tax information purposes. If this is adopted by EU, it will become relevant for Norway to join this legislation. That is why this proposal can have consequences for Norwegian legislation concerning country-by-country reporting according to the accounting law.” (Translated by PWYP Norway)

This means that the EU commission is under pressure to publish the information on BEPS. But it is important to note that BEPS continues to have the same weaknesses. It is too little too late, where any data base can be used and where the possiblities for evasion are many.

The companies will likely prefer to report on “country-by-country reporting for tax purposes”, that is OECD´s BEPS proposal.

Read PWYP Norway’s consultative statement about BEPS: ”Consultative statement about country-by-country reporting for tax purposes” (In Norwegian)

Warning: Lobby danger

The politicians must be on the alert if the companies start using the retoric that they “only want one CBCR”, and refer to “country-by-country reporting for tax purposes”, that is OECD´s BEPS proposal. The politicians should not be pressured into “pulling back” extended country-by-country reporting” just because they publish BEPS information.

The Standing Committee on Finance and Economic Affairs is tired of waiting

The Standing Committee on Finance and Economic Affairs has also sent a letter to the Committee on Scrutiny and Constitutional Affairs with a note to follow up the request resolution which was published June 19. 2015.

Read the letter (in Norwegian) here. The remark is on page 4:

Innst. 246 S (2015–2016). Meld. St. 15 (2015–2016).pdf
PDF iconInnst. 246 S (2015–2016). Meld. St. 15 (2015–2016).pdf

The Standing Committee on Finance and Economic Affairs´ leader, Hans Olav Syversen, makes this statement in the newspaper Vårt Land:

“-We, as a committee, have written a report for the follow-up of the request agreement. It expresses our impatience in a letter to The Committee on Scrutiny and Constitutional Affairs. We ask that the Government be informed of this, and that they prioritize this. It is not common for the Committee to do this.” (Translated by PWYP Norway)

Read: ”The Committee on Scrutiny and Constitutional Affairs is now pulled into the CBCR process​”

Strengthening country-by-country reporting regulations in Norway. What next?

Just before the summer recess started in Norway, the Norwegian Parliament, the Storting, agreed to strengthen country-by-country reporting regulations. To find out how the Norwegian Government plans on following up on this new regulation, Truls Wickholm, Member of Parliament for the Norwegian Labour Party, has sent a written question to Siv Jensen, Norway’s Finance Minister.

The parties represented in the Norwegian Parliament on 19 June 2015 unanimously agreed to sharpen work on financial transparency. To boost this revised national law, the head of the Finance Committee, Hans Olav Syversen, from the Norwegian Christian Democratic Party, proposed to strengthen country-by-country reporting regulations.

PWYP Norway has been working on this law for several years and believes that this is a great victory for the transparency movement in their quest for a top notch global transparency standard. The key change that this law bring is that companies working in extractives and forestry in unplanted forests now also have to report on investments in tax havens, which they had previously managed to avoid.

Because companies often do not pay taxes in tax havens, the importance and relevance of this new requirement will only be achieved when we get strong regulations that compel companies to report on their costs in tax havens.

“It is on the cost side that companies organise themselves in such a way that they can avoid paying taxes”, says Mona Thowsen, Secretary General of PWYP Norway.

But the question is now how will the Treasury Department follow up work on this regulation in practice? To get an answer to this question, Member of Parliament for the Labour Party, Truls Wickholm has sent the following written question to Finance Minister Siv Jensen:

Truls Wickholm: Just before the summer, the Parliament decided to strengthen the work of the Country by Country reporting based on a broad consensus that the current regulations are not working as intended. In what way is this being followed up on by the Finance Minister, keeping in mind that the minister will submit a regulation for consultation by the end of the year? If not, when will the minister do this, and how does the Minister foresee civil society engagement with the regulations and its influence on the design and content of the regulations?

See the debate and parliamentary resolution 19/06/2015 when the case was dealt with in conjunction with the Parliament’s considerations of a revised national budget for 2016.
Click here to see the question on Stortinget.no (link is external and in Norwegian)

Treasury Siv Jensen must respond within six working days.

Three remaining elements
PWYP Norway believes that we should introduce a so-called extended country-by-country reporting. We lack only three elements to get a good law that will function as intended:

1. Take full costs of country-by-country reporting.

2. That the companies have to report from every country they are registered in without exception.

3. That information is integrated as notes to the accounts in order to avoid that other information than the actual figures reported.

This article was originally posted on the PWYP Norway website and shared here with their consent. If you want more news from PWYP Norway you can subscribe to their English Newsletter on their website.


Founded in 2006, PWYP Norway has focused on mandatory disclosure rules and the introduction of “enhanced country-by-country reporting” at the national level and in conjunction with other European members. The coalition has also developed several reports on financial and tax transparency, and supports the EITI in Norway. Capacity building is a key part of its work. It has created and implements TRACE, a capacity-strengthening programme for NGOs, the media and unions in resource-rich countries in Africa and Latin America. Visit PWYP Norway’s website or follow the coalition on twitter.