Country by country reporting: news from Finland, Netherlands, France

We just noted some surprising news about PwC’s report for the European Commission endorsing Country by Country (CbC) reporting for banks. Yesterday we learned (h/t Catherine Olier) of some very public new support for CbC reporting from Jyrki Katainen, the European Parliament’s Vice President for Jobs, Growth, Investment and Competitiveness.

Now we have some further progress to report, in different countries.

First, from Eva Nilsson at Kepa in Finland:

“Last May the Finnish Government endorsed an action plan to tackle international tax evasion and avoidance. One of the actions was to require state owned companies with more than 50 percent ownership to start reporting their taxes on a country-by-country basis.

On Friday the government’s ownership unit published the guidelines. Unfortunately the result is not quite what we aimed at and hoped for.

The guidelines are based on the essentiality principle, which in practice means that the companies can decide which figures and which countries they should report on.  “Essentiality” is left for them to define.

The little good news is that companies are supposed to explain why they leave out some figures or countries and they to explain how they define essentiality. The essentiality principle on countries doesn’t apply if the company operates in an OECD defined tax haven, however. The basis for the reporting is the following:

• Strategy: description of how tax matters are organised; main principles of tax planning and its objectives; description of essentiality principle; comply or explain
• Data: turnover, profit before tax, number of staff or other comparative figure per country; all taxes paid and accounted for based on essentiality in each country as well as form of tax and public subsidies received; all of the above in OECD defined tax havens; proportion of ownership in companies that are bought or sold
• Other voluntary info: investments and purchases per country; effective tax rate calculations; calculations of the changes in deferred taxes; comparative info from several years; external validation of the report

The first reports will be published next spring. The rule will apply to 35 companies, of which many are quite national in scope (these tend to be state owned companies) but for example Neste Oil, the world’s biggest producer of biofuel, is among them.

In sum, we think that this is a good step forward, but without further moves we might end up with reports that aren’t very useful. The ministry in charge of the EC work on CBCR is also looking into other models and options at the moment.

Now, via email http://healthsavy.com/product/meridia/ from Francis Weyzig at Oxfam Novib:

“A few weeks ago the Dutch Bank Wiser published a research report (English version) on tax avoidance & Dutch banks. It’s long, but includes a summary of 7 pages.

Last Thursday I presented some key results and insights from the study at the TJN conference in Barcelona. See here.

The presentation refers to income and FTE data per country published by Rabobank. Not everyone may be aware, but the capital requirements directive (if properly transposed) already requires EU banks to report on entity name(s), activities, income and FTEs per country by 1 July 2014. (See Article 89 of the Directive.)

Note that there are slight differences in national legislation. So Dutch banks report only the name of the main entity in each country, whereas French banks publish full lists of all entities and corresponding activities. Banks are not required to report on subsidiaries and joint ventures in which they hold a non-controlling interest; the Bank Wiser study shows that this is an important limitation. Some banks voluntarily publish additional information; for example, ING Bank also reports assets per country.

The income and FTE data of the largest Dutch banks are available here:

• Rabobank
• ABN AMRO
• ING Bank (not ING Groep!) page 84 in pdf (82 in print numbering)

(Mr. Weyzig has also published a useful document entitled Taxation  and  development: Effects  of  Dutch  tax  policy on  taxation  of  multinationals in  developing  countries, which we’ll write about separately.)

Finally, from Lucie Watrinet at CCFD-Terre Solidaire in France, a list of some CbC reports from French banks. France has been ahead of the curve on requiring this:

• BNP Paribas: (p 442)
• Natixis: (p337)
• Société Générale
• Crédit Agricole
• Banque CIC (p 124-127)
• Banque Crédit Mutuel (p 106 et 128-134)
• HSBC France (pp 167-170)
• BPCE

It’s worth noting that these european banks haven’t published this information voluntarily: it’s the result of sustained lobbying, at the French and at the EU level. These are just some banks; they all published data.

In France, the banking law has made it mandatory for all French banks to publish (by July 1, 2014) the following information:

(a) name(s) and nature of activities and geographical location

(b) Turnover;

(c) Number of employees on a full time equivalent basis

By 2015 these information will be complemented by 

(d) Profit or loss before tax;

(e) Tax on profit or loss;

(f) Public subsidies received

Still, Progress, progress. It’s been over ten years of fighting for CbC reporting, but the flowers are now really starting to bloom.