10 reasons why we need public country by country reporting

Added 14 Mar 2016
1) A crucial step in the fight against corporate tax avoidance. As long as multinational corporations are allowed to keep secret the amount of taxes they pay and the business they do in each country where they operate, it will not be possible to spot aggressive tax planning and tax avoidance, and therefore not possible to start solving the problem.

2) More economic development in the world’s poorest countries. UNCTAD has estimated that developing countries lose at least €70-120 billion per year due to corporate tax avoidance. Until this problem is solved, their sustainable development will be an uphill battle. Public country by country reporting is a vital tool for developing countries to fight the problem and mobilise domestic resources to fund their economic development.

3) Less debt and austerity - more funding for public services and environmental protection in both developed and developing countries. Tackling corporate tax avoidance can generate large amounts of new resources. In addition to the €70-120 billion per year that are lost in developing countries, conservative estimates say that the EU loses € 50 to 70 billion per year due to corporate tax avoidance. This money is desperately needed to reduce debt levels, and fund public services and environmental protection.

4) Positive impacts on gender equality. As public funds are lost through tax dodging by multinational corporations, many governments are introducing austerity policies, which often impact women harder than men. At the same time the tax pressure increases on other actors in the economy, including consumers who pay taxes through value added tax (VAT). Since consumption taxes generally fall more heavily on women, tax dodging by multinational corporations can undermine the fight for gender equality.

5) Fair conditions for small and medium enterprises (SMEs) and thereby more jobs. SMEs that only operate in one country are not able to use transnational legal structures to avoid taxation. They are therefore locked in unfair competition when multinational corporations engage in aggressive tax planning and avoid taxes. Fighting the problem will strengthen SMEs. Considering that SMEs are the backbone of the economy, providing two-thirds of the employment in the EU, strengthening SMEs will have a positive effect on employment.

6) Better political decision-making. Public country by country reporting would make it possible for parliamentarians to access information on where multinationals operate and where they pay their taxes, which will not be the case if companies only report to tax administrations. This information is vital to help lawmakers determine whether laws need to be changed in order to close loopholes in tax systems.

7) Healthier economy and security for investors. Public country by country reporting will make it clear which multinational corporations are at risk of landing in a tax scandal and incentivise corporations to reduce these risks by paying their fair share of taxes. This transparency, as well as increased predictability and stability, will make it possible for investors to make better informed investment decisions, as well as benefit the economy as a whole. By introducing public country by country reporting, the EU can attract more investors and help stabilise its economy.

8) Less corruption. Public country by country reporting can help to flag up corruption risks by shedding light on any special arrangements between companies and governments.

9) More trust between citizens, politicians and multinational corporations. Public country by country reporting will shed light on the realities of the tax payments of multinational corporations. This transparency will be an important first step towards re-establishing the trust between citizens, politicians and multinational corporations, and ensure that corporations are already paying their fair share of taxes and will not be suspected of tax dodging.

10) A more stable and fair environment for multinational corporations. Tax scandals are not good for companies. Currently, multinational corporations that dodge taxes have to live with a constant risk that their secrets will get leaked to the public and cause an outcry, which can impact their brands and lead to sudden and dramatic increases in the amount of tax that governments demand that they pay. Public country by country reporting will in time create more predictability and stability for multinational corporations, as well as ensure that corporations that do pay their fair share of taxes will not have to face unfair competition from those that do not.