June 12, 2013
Clark Gascoigne, +1 202 293 0740 ext. 222
European Parliament Passes Landmark Transparency Provisions for Oil, Gas, Mining, and Logging Companies
Canadian PM Harper Announces Intent to Adopt Similar Policies for Canadian Firms
G8 Urged to Make Disclosure Global Norm at Next Week’s Summit; Expand Country-by-Country Reporting to Firms in All Sectors
WASHINGTON, DC – Global Financial Integrity (GFI) lauded the European Parliament today for adopting new transparency rules for all EU listed extractive industries companies as well as all large, privately held extractive industries companies incorporated in the EU. Announced informally by European leaders in April, the rules were officially adopted by the Parliament Wednesday in what GFI referred to as a major victory for anti-corruption proponents. Also on Wednesday, the Canadian government announced that it intended to move forward to enact similar rules, a move lauded by GFI, a Washington, DC-based research and advocacy organization.
“The new transparency rules in Europe and the announcement from the Canadian Prime Minister are two key advancements for anyone who cares about fighting poverty, protecting investors, making markets more efficient, or reducing corruption,” remarked GFI Director Raymond Baker. “Our research shows that the developing world loses roughly US$1 trillion per year to crime, corruption, and tax evasion. This is a systemic problem caused largely by the opaque, secretive global financial system. For citizens of resource-rich countries, the new EU rules—as well as the potential Canadian rules—will shine a light in places that need it most.”
The EU legislation requires large, privately owned European companies and all publicly held European firms operating in the oil, gas, mining, and logging sectors to disclose information on payments made to governments. All firms covered by the rules are required to disclose on a project-by-project basis all payments made to governments above €100,000 (approximately US$131,000) including taxes paid, royalty fees, and license fees.
Connections to Cardin-Lugar
The European legislation builds upon a U.S. law passed in 2010, the Cardin-Lugar provisions (section 1504) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which requires all companies registered with the U.S. Securities and Exchange Commission operating in the oil, gas, and mining sectors to report on payments made to foreign governments.
Unlike the Cardin-Lugar provisions, the European rules also cover large, privately owned firms, and they extend to companies operating in the logging sector. Moreover, the legislation instructs the European Commission to consider extending the rules to more industries.
“With strong legislation in place in Europe and the United States, and with Canada committing to adopt similar rules, transparency in the extractives industries is quickly becoming the global norm. It’s time now for all G8 countries—whose leaders meet in Northern Ireland next week—to adopt similar rules,” added Mr. Baker.
Extending the Rules
“While it’s important to enact transparency in the extractive industries, corruption and tax evasion are not exclusive to oil, gas, mining, and logging,” noted Mr. Baker. “The next step is extending these rules to require multinational companies operating in all industries to disclose profits earned, taxes paid, royalties, license fees, subsidiaries, and staff levels on a country-by-country, if not subsidiary-by-subsidiary, basis.”
The European Union proposed in late February and adopted in April requirements that all financial institutions disclose profits made, taxes paid, subsidiaries, and staff levels on a country-by-country basis. GFI praised the proposal as progress and likewise urged the EU to extend those transparency requirements to all business sectors.
European leaders meeting last month in Brussels committed to considering extending country-by-country reporting to all large multinational companies. GFI believes extending the requirements is essential to cracking down on tax haven abuse, empowering shareholders, and boosting tax collection in rich and poor countries alike.
“It is now the norm in international business to shift corporate profits through accounting gimmicks to low- and no- tax jurisdictions. This aggressive tax avoidance starves governments of revenue at a time when rich and poor nations alike are struggling to pay their bills. It’s a global epidemic that must be addressed at the G8 Summit next week. The G8 should require all multinational companies to report their profits, taxes paid, sales, employee levels and more on a country-by-country basis,” said Mr. Baker.
Enactment of the New EU Law
The new transparency rules passed today by the European Parliament as part of the EU Transparency and Accounting Directives are required to be adopted into each European nation’s domestic laws within two years of their enactment, which officially occurs upon publication of the Directives in the Official Journal of the European Union.
Notes to Editors:
- To schedule an interview with Mr. Baker, Heather Lowe, Joshua Simmons, or other GFI spokespersons, contact Clark Gascoigne at +1 202 293 0740, ext. 222 / firstname.lastname@example.org. On-camera spokespersons are available in Washington, DC.
- Click here to read the press release from the European Parliament announcing the adoption of the new rules.
- Click here for news from CTV on the Canadian government’s commitment to adopt similar rules.
- Click here to read the official press release from the Publish What You Pay (PWYP) Coalition on today’s vote in the European Parliament and the news from Canada. GFI is a member of the PWYP Coalition.
- Click here to read GFI’s analysis of last month’s European Council meeting announcing the possible extension of country-by-country reporting to all sectors.
- Click here to read the February 2013 press release from GFI praising the EU for announcing the country-by-country reporting requirements for financial institutions.
- Click here to read the April 2013 press release from the European Parliament announcing the adoption of the rules requiring country-by-country reporting for financial institutions.
- Click here for more information on how country-by-country reporting can help curtail illicit financial flows.
- Click here for more information on Section 1504 of the Dodd-Frank Wall Street Reform Act of 2010.
+1 202-293-0740 ext.222
Global Financial Integrity (GFI) is a Washington, DC-based research and advocacy organization which promotes transparency in the international financial system as a means to global development.
For additional information please visit www.gfintegrity.org.