Natural Resource Transparency: Call for Urgent EU Action on Corporate Reporting Standards
May 27th, 2011
May 27th, 2011
Publish What You Pay and Eurodad have launched a briefing paper (PDF) calling on the EU to propose legally binding measures to require natural resource companies to publish key financial information for each country and project in which they operate.
In recent months, civil society groups working on financial transparency and on tax and development have actively engaged the European Commission and other European institutions responsible for drafting key legislative and non-legislative proposals that will potentially reform European financial reporting standards.
This paper aims to contribute to the current debate around country-by-country reporting which we strongly believe will have implications for the future of financial transparency across the European Union and globally.
What’s the problem?
The extractive industries generate billions of Euros a year. This has the potential to drive economic and social development in resource-rich countries. Yet many countries endowed with natural resources like the Democratic Republic of Congo are poor. The North African and Middle Eastern governments experiencing protests against rampant corruption and political marginalisation are funded significantly by oil revenues. In places like Nigeria and Peru, citizens are blocking and attacking oil and mining companies, angry that they carry most of the economic and environmental burden while the companies make huge profits. This threatens European energy security and leads to rising prices.
How corporate transparency would help
Until now, a shroud of secrecy has cloaked the deals and revenue flows within the extractives sector. Money received by governments can be misused or stolen instead of channelled to improve the lives of citizens.
Countries may not get a fair deal for the value of their resources due to secret agreements, poor enforcement of the tax law or its abuse by unscrupulous companies. When companies pay tax, governments are often unaccountable to their citizens for how these revenues are used. Countries also need information on the operations of similar companies in other countries to enable them to get a ‘fair’ deal. Without the right information, tax authorities struggle to monitor what international companies should be paying and civil society struggles to hold governments and companies to account. In these conditions, markets and investors lack sufficient data to assess country and project specific risks. Transparency is therefore a major part of the solution.
This is a crucial time for the European-wide rule change
In September 2010, the Commission undertook to consult and bring forward legislative proposals on country-by-country financial disclosure within one year following repeated requests from the European Parliament. This follows the passing in July 2010 of the Dodd-Frank financial reform bill in the United States, which includes a provision obliging US-listed companies engaged in oil, gas or mineral extraction to report how much they pay to governments in an annual report to the Securities and Exchange Commission.
Download the full briefing (PDF) to find out more.