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Category : Business

IDC seeks transparency from oil, gas and mining firms over amount of tax paid in developing countries

A parliamentary inquiry is likely to press the government into signing an international agreement to force oil, gas and mining companies to report how much tax they pay to developing countries.

The recommendation is expected to follow the conclusion of a series of select committee hearings in front of the International Development Committee, including Tuesday’s session where two of the largest multinationals listed on the London Stock Exchange insisted it would be difficult and costly for them to make wider disclosures on taxation.

Senior executives from commodity trading group Glencore and brewer SAB Miller appeared to resist calls by campaign groups and development agencies for more transparency. The committee’s chairman, Malcolm Bruce, said that one proposal being considered was for the UK to commit to signing up to Extractive Industries Transparency Initiative, a programme designed to increase transparency over payments by companies to governments and to government-linked entities. Bruce said: “The US is considering signing up [to EITI]. Colombia is committed. The UK doesn’t appear to be. That may well be … a clear omission.”

During questioning Tim Scott, global head of tax at Glencore, said: “For country by country reporting of financial information, there are pros and cons. The pros are the transparency. The cons are the cost of producing this information in a reliable and audited format. The second potential disadvantage is with this information it is not clear to me that anybody would be any the wiser on the level of taxation paid or whether the right tax had been paid at all. That is simply because one has to look at financial reports in the context of the tax law and tax returns before one gets a very clear idea. So I’m not too sure that this is amazingly useful.”

Glencore has previously stated its commitment to the EITI and providing a breakdown of its tax payments by region.

Graham Mackay, chief executive of SAB Miller, said to the committee: “This transparency drive to achieve a right outcome, we believe is doomed.”

The EITI was announced by then prime minister Tony Blair at the World Summit for Sustainable Development in Johannesburg in 2002. Despite it being originated in the UK, the British government has never signed up to the scheme. So far, most of the countries that have implemented EITI are developing countries, although last September President Obama committed the US. He said: “We’re continuing our leadership of the global effort against corruption, by building on legislation that now requires oil, gas, and mining companies to disclose the payments that foreign governments demand of them. Today, I can announce that the United States will join the global initiative in which these industries, governments and civil society, all work together for greater transparency so that taxpayers receive every dollar they’re due from the extraction of natural resources.”

The select committee is expected to publish its report in the next six weeks.

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