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Africa/Global: Open Data for Tax Justice
AfricaFocus Bulletin
February 28, 2017 (170228)
(Reposted from sources cited below)
Editor's Note
"Multinational companies typically publish global, consolidated
accounts - and international accounting standards now allow these to
roll into one all financial information on the substance of their
economic activities, or at best to provide regional figures. This
means that country-level information on profits, revenues, taxes,
borrowings and employees, for example, are not provided. ... As the
name suggests, the longstanding proposal for country-by-country
reporting (CBCR) would make multinational companies break down and
publish their results for each country. This is essential for
citizens to know what companies and their affiliates are doing where
they live, and what contributions they are making." - Open Data for
Tax Justice announcement
The need for CBCR, a demand first advanced by tax justice
campaigners in 2003, has become widely recognized, leading to
proposals by international bodies such as the "rich states" club of
the OECD (Organisation for Economic Co-operation and Development).
The OECD proposal for collecting and sharing such data only by
selected tax authorities, however, is in sharp contradiction to the
initial goal of public transparency. And further retreats from
transparency are already visible in initial actions by the
Republican-dominated U.S. Congress (see
http://www.africafocus.org/docs17/iff1702.php).
In response, leading tax justice campaigners have set out a roadmap
for "the creation of a global public database on the tax
contributions and economic activities of multinational companies. "
Using new technologies to collect in standard format information
from a wide variety of public sources, the database has the goal of
making information accessible worldwide for journalists,
policymakers, tax officials, and civil society activists.
This AfricaFocus Bulletin contains excerpts from the press release
and white paper released on February 17, 2017
For more details, see http://datafortaxjustice.net
For previous AfricaFocus Bulletins on tax justice and related
issues, visit http://www.africafocus.org/intro-iff.php
++++++++++++++++++++++++++++++++++++++++++++++++++++++++
The Trump Election: Intersecting Explanations
http://www.noeasyvictories.org/usa/trump-win-reasons.php
Observations (fourth installment, Feb 28, 2017)
Much of the commentary on the narrow victory by Tom Perez over Keith
Ellison in Saturday's election for the chair of the Democratic
National Committee has had a narrow focus, interpreting it as a
victory for the Democratic establishment over progressives who had
backed Bernie Sanders in 2016. While to some extent true, that is a
highly over-simplified view, and neglects the wide-ranging
mobilization and rethinking within the broader context of the highly
decentralized Democratic Party, progressive movements, and their
common social base.
Several articles on Saturday's results with more nuanced analysis:
Peter Dreier, "Three Cheers for the Perez-Ellison DNC Team To Move
the Democrats in a Progressive Direction," Huffington Post, February
25, 2017 http://tinyurl.com/gkqmp46
David Weigel, "Why did Keith Ellison lose the DNC race?" Washington
Post, February 26, 2017 http://tinyurl.com/zq7hf9r
James Downie, "Tom Perez's biggest problem as DNC chair: His
backers," Washington Post, February 27, 2017
http://tinyurl.com/hqu2vxd
And, for a wide range of articles digging more deeply into the
mistakes and structural limitations of the Democratic Party and the
Clinton campaign, and their implications for current strategy, see
http://www.noeasyvictories.org/usa/clinton.php (10 articles from
Nov. 11 - Dec. 20, 2016 and http://www.noeasyvictories.org/usa/democratic-party.php (15 articles
from Mar. 30, 2016 - Feb. 21, 2017
And you can find sources on 19 other relevant "explanations" for the
election outcome at http://www.noeasyvictories.org/usa/trump-win-reasons.php
++++++++++++++++++++++end editor's note+++++++++++++++++
Launch of White Paper Setting Out Roadmap for Creation of a Public
Database of Country-by-country Reporting Data
Press Release
17th February 2017
Leading tax justice campaigners and open data specialists are today
publishing a white paper setting out a roadmap for the creation of a
global public database on the tax contributions and economic
activities of multinational companies.
The open database would draw on various existing information sources
to create a central point for publicly available country-by-country
reporting (CBCR) data to help tax authorities, tax justice
campaigners, investors, journalists and citizens to gain a better
understanding of the activities of these companies.
Multinational companies typically publish global, consolidated
accounts - and international accounting standards now allow these to
roll into one all financial information on the substance of their
economic activities, or at best to provide regional figures. This
means that country-level information on profits, revenues, taxes,
borrowings and employees, for example, are not provided. There may
be a set of results for "Africa" or "Europe", but even then the
combination of operations in (say) Ghana and Mauritius, or France
and Luxembourg, makes it is impossible to unpick these numbers in a
useful way.
As the name suggests, the longstanding proposal for country-bycountry
reporting would make multinational companies break down and
publish their results for each country. This is essential for
citizens to know what companies and their affiliates are doing where
they live, and what contributions they are making.
An OECD standard has now been introduced which will require all
multinationals of a certain scale to report this information
privately to the tax authority in their headquarters country. In
addition, there are public standards for limited CBCR data with
respect to the extractive and financial sectors in the EU, creating
multiple requirements for some multinational companies. It is
critical that this data is used effectively, and seen to be so used.
The next two to three years provide a window in which to establish a
single format for reporting, to ensure lower compliance costs for
businesses and to facilitate more effective use of the data by civil
society, media and tax authorities alike. This will both confirm the
value of CBCR and help policymakers to move towards a global
consensus on requiring a comprehensive public CBCR under a single
standard.
The paper - What Do They Pay? - is coauthored by Alex Cobham (Tax
Justice Network), Dr Jonathan Gray (University of Bath and Open
Knowledge International) and Professor Richard Murphy (University of
London). It is the result of a partnership between the Tax Justice
Network (TJN) and Open Knowledge International (OKI) supported by
Omidyar Network and the Financial Transparency Coalition (FTC). TJN
has, since its establishment in 2003, led the way in developing and
promoting the idea of public CBCR for multinational companies. OKI,
who partnered with TJN in establishing the Open Data for Tax Justice
initiative, are pioneers in using open data to achieve tangible
policy results and human progress. The FTC has championed public
CBCR since its inception, as have many FTC members including
Christian Aid, Tax Justice Network-Africa and TJN.
The white paper is divided into four main sections. Firstly, the
authors present a set of user stories, questions, requirements, and
scenarios of usage for a database. Secondly, they look at what kinds
of information a public database could and should contain. Thirdly,
they look at the opportunities and challenges of building a public
database drawing on various existing information sources. Fourthly
and finally, the authors suggest next steps for policy, advocacy,
and technical work towards a public database.
As leading organisations in this field, TJN and OKI now propose to
establish an open database, to include all publicly available CBCR
data; to provide a venue for multinationals that wish to lead in
transparency by publishing their data voluntarily; and to make the
data, and core tools and risk measures, accessible to a wider
audience.
Alex Cobham, chief executive of the Tax Justice Network, says:
"This white paper marks an important step towards the creation of a
fully public database to track the tax behaviour of both
multinationals and jurisdictions from Luxembourg to Mauritius, and
from Bermuda to Singapore. We're delighted that so many
organisations and experts have contributed to this process, which
has really strengthened the analysis and design. And we're
delighted, too, at the ongoing discussions with investors and
business groups around providing and using data.
"It's striking that civil society is leading on this process, rather
than the OECD or a global tax body. But just as civil society
created the original proposal for country-by-country reporting,
perhaps it's right that we should also take a lead in creating the
database that will eventually deliver the full benefits from lower
costs for multinationals dealing bilaterally with different tax
authorities, and for tax authorities exchanging information with
each other, to the benefits of the public being empowered to hold
governments and multinationals to account for their role in
international tax avoidance."
Dr Jonathan Gray, Prize Fellow at the University of Bath's Institute
for Policy Research and Senior Advisor to Open Knowledge
International, says:
"This new report outlines the case for a global public data project
that would transform democratic engagement around the role of
multinational corporations in our economies. A civil society
database would be more than just an information source: it would
facilitate collaboration amongst researchers, journalists and
campaigners and pave the way for an official database at an
international body such as the UN."
Richard Murphy, Professor of Practice in International Political
Economy at City, University of London and director of Tax Research
UK, says:
"Country-by-country reporting was created to be used. Its purpose is
to show what is happening in the world and to change it. That's why
a database holding all publicly available CBCR data is vital: with
it we can see who is doing what, and where and demand change from
the governments and companies engaged in tax abuse."
Launched in 2016, supported by a grant from Omidyar Network, the FTC
and coordinated by TJN and OKI, Open Data for Tax Justice is a
project to create a global network of people and organisations using
open data to improve advocacy, journalism and public policy around
tax justice.
More details about the project and its members can be found at
http://datafortaxjustice.net
What Do They Pay?: Towards a Public Database to Account for the
Economic Activities and Tax Contributions of Multinational
Corporations
Alex Cobham
Chief Executive, Tax Justice Network
Visiting Fellow, King's College London
Jonathan Gray
Prize Fellow, Institute for Policy Research, University of Bath
Co-Founder, Public Data Lab
Senior Advisor, Open Knowledge International
Richard Murphy
Professor of Practice in International Political Economy, City,
University of London
Director, Tax Research UK
February 2017
[Excerpts: for full report see
http://datafortaxjustice.net/what-do-they-pay/]
Introduction
Many of the policy proposals put forward by the Tax Justice Network
(TJN) after its establishment in 2003 were so far from mainstream
thinking about tax that it was difficult to find a policy audience
with which to discuss them seriously (Murphy, Christensen & Kimmis,
2005). But by 2013, just ten years later, these proposals had come
to form the basis for the global policy agenda - including "Countryby
-Country Reporting" (CBCR) of the tax contributions and economic
activities of multinational companies.
So common is the exposé of tax avoidance by multinationals today
think of headlines featuring Apple or Amazon, Google or Starbucks
that it would be easy to forget how recently things changed. But the
Tax Justice Network's first front-page media splash was only in
2007. Even the headline, 'Revealed: How multinational companies
avoid the taxman', has become so familiar that it would be almost
redundant today (Guardian, 2007).
Over the past decade, international media coverage and civil society
campaigning has flourished. Investigative journalists have
undertaken international collaborations highlighting the scale and
societal effects of tax avoidance strategies. In many lower-income
countries, the tax treatment of multinationals has risen to the top
of policy agendas, driven by civil society mobilisation and public
anger. In OECD countries, protesters have taken to the streets to
oppose the minimal contributions of high street companies. The issue
has caught the attention of populist political movements of various
stripes.
By 2013, issues of tax were atop the global policy agenda too. The
G8 and G20 groups of countries set the aim of reducing the
'misalignment' between the location of multinational companies'
economic activity, and the location of declared, taxable profits.
The OECD was given a mandate to change international tax rules to
achieve this end, including the specific remit to introduce a
country-by-country reporting standard. While there are a range of
benefits to this data being compiled and made public, the critical
development is that it is intended to show for the first time
exactly where companies do business, and the extent to which this is
aligned or misaligned with where they declare profits. This is
would not be a smoking gun to establish that a specific tax
avoidance structure has been at play; but it could be a powerful
instrument to help a variety of different actors to know where to
investigate further, and what the scale of the problem may be.
The OECD standard for CBCR is technically very close to the original
TJN proposal (Murphy, 2003) - but politically very far from it. The
TJN proposal was for accounting data that it always intended be made
public, to ensure the accountability to citizens of both
multinationals and of tax authorities. The OECD data, in contrast,
is to be provided privately to the tax authority in a
multinational's headquarters jurisdiction. It may then be exchanged,
under a range of conditions, with other tax authorities in which
subsidiaries of that multinational company trade. But under no
circumstances are those tax authorities allowed to make the
information more widely accessible. Longhorn et al (2016) provide a
comprehensive analysis of various CBCR standards, their evolution
and the arguments and evidence on their value.
Knobel and Cobham (2016) demonstrate the paths by which OECD
reporting could exacerbate, rather than ameliorate, existing global
inequalities in taxing rights with respect to multinationals. In
addition to failing to respond to lower-income countries' revenue
losses, the lack of transparency means that the current standard
will also fail to build confidence in the fair tax treatment of
these high-profile taxpayers - missing an important opportunity to
build tax morale and wider public support for tax compliance.
As things stand, if CBCR data is not made publicly available the
OECD initiative would perhaps be the least transparent transparency
measure imaginable. And yet, it marks an important step forward for
CBCR. With most major multinationals now actually facing the
obligation to comply with the OECD requirement, the argument about
transparency has turned. The question now is no longer 'Why should
this information be collected?' Instead, it is now 'Why should this
information, now collected, be kept secret?'.
The OECD is in some sense a late adopter, with multiple country-bycountry
reporting standards having been introduced since the
original proposal. Notably, these include public CBCR for extractive
sector companies in both the EU and US, and for financial
institutions in the EU. There were also two notable attempts to
include CBCR data in International Financial Reporting Standards,
and although both failed the fact that this was not on technical
grounds did prove that this data is within the scope of such
standards. The data is, to be clear, accounting data rather than tax
data: it reflects the location of activities, and is not an extract
from a tax return.
That some variations on CBCR have been adopted does, however, mean
that in the absence of any official attempts, there is the
possibility for civil society to take steps towards establishing a
public database of all available CBCR information. This could
support greater use of the existing data by various stakeholders,
from tax authorities to activists and journalists. The data produced
may also be of some interest to investors, many of whom are now
showing some awareness of the significance of this data.
Importantly, it also provide a platform for the creation and testing
of risk measures - above all, those that capture the extent of
profit misalignment and therefore allow tracking of progress on the
global policy aim of its curtailment. In addition, such a database
would provide an avenue for companies that embrace transparency to
begin unilaterally to publish their own CBCR.
Overall, the use of such data is likely to provide valuable evidence
not only on the underlying issues of misalignment, but also on the
challenges and opportunities of CBCR data. In particular, it may
help to resolve questions on the need for data quality and
consistency, and to motivate convergence towards best practice among
existing and possible future standards. Over time, it is possible to
imagine such a database being hosted within a more official setting
such as the mooted intergovernmental tax body that could be created
at the UN (Cobham and Klees, 2016).
For now, this report focuses on what a global public database could
look like; what public sources of information already exist and
which may be important to prioritise in addition; how far towards
ideal CBCR it is possible to reach using existing sources; and what
changes would be needed to strengthen the contribution from CBCR
towards the shared, global policy aim of reducing corporate tax
avoidance by curtailing profit misalignment.
Our aim is not to create the perfect, final product in terms of a
public CBCR database. In their "Changing What Counts" report, Gray,
Lämmerhirt and Bounegru (2016) emphasise the role that citizen and
civil society data can play as an advocacy tool to shape
institutional data collection practices. In that spirit, the aim
here is to provide not a final product but the basis for discussion,
experimentation and iterative improvement, that we hope will help to
prepare the way for a global database that is maintained by an
international public body in the longer term.
To that end, we would like to experiment assembling and aligning
data that has been published in accordance with various existing
CBCR standards and publishing requirements. This may be used to
construct an open, online database into which researchers and other
actors can enter new data as it becomes available, and which has the
potential to become a longer term global repository for public data
about the tax contributions and economic activity of multinationals,
and a useful resource for future research and policy analysis. The
proposed database could contain and support a range of different
tools and indicators, in order to facilitate different forms of
analysis and comparison across companies and across jurisdictions.
This would represent an important step towards understanding the
role of multinationals in the composition of the world economy as
well as paving the way for an official public database.
The purpose of creating a database would extend beyond that of a
technical project to simply gather and publish existing information.
There are other things that we might expect a global civil society
database to do. As economic sociologist Donald MacKenzie argues,
economic models can be considered not just cameras which represent
the world, but also as engines which change them in different ways
(MacKenzie, 2008). By taking steps to render the economic activities
and tax contributions of multinationals publicly visible,
measurable, quantifiable and accountable, it might be expected to
change not only the dynamics of corporate reporting (as one might
expect), but potentially also the operations and organisation of
multinational firms as they adjust to new forms of publicity and
public engagement. The behaviour-changing effects of public data on
the economic activities and tax arrangements of multinationals are
certainly deserving of further attention and research.
A public database could potentially play a social function in
assembling and facilitating collaboration between different "data
publics" interested in multinational taxation. It would thus
represent an experiment in socio-technical design to organise public
activity around tax base erosion. As well as supporting links
between relevant data projects such as OpenCorporates, Open
Ownership, the Open Contracting Partnership and OpenOil, it could
act as a locus to coordinate the efforts of different actors and
groups who are interested in undertaking research, journalism,
advocacy, public policy, and public engagement work in the service
of building a fairer global tax system. This would not simply be a
matter of catering to pre-existing social groups, but also
potentially creating new kinds of associations and collaborations
between different actors. As such a public database could also be
viewed as a democratic experiment especially if these different
groups play not only a role not only in using and consuming data,
but also in co-designing and assembling the database (Gray, 2016a,
2016b). Such a database might thus open up space for new kinds of
democratic deliberation and public engagement around how the global
economy is organised and how some of the largest most powerful
economic actors on the planet - both multinationals and
jurisdictions including major tax havens - can be understood,
managed and held to account; as well supporting civil society
interventions around the kinds of transparency measures and data
collection processes we have in place to understand and shape the
behaviour of these actors.
AfricaFocus Bulletin is an independent electronic publication
providing reposted commentary and analysis on African issues, with a
particular focus on U.S. and international policies. AfricaFocus
Bulletin is edited by William Minter.
AfricaFocus Bulletin can be reached at africafocus@igc.org. Please
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