RB tax avoidance – company calls for public country by country reporting after Oxfam report reveals profit shifting
Oxfam has today released a report on tax dodging by RB, the company formerly known as Reckitt Benckiser and the maker of thousands of well known household products.
The report looks at the 2012 restructuring of the company which saw it set up ‘hubs’ in the Netherlands, Dubai and Singapore, all well known corporate tax havens, and demonstrates the continuing power of the corporate expose as a mechanism for encouraging companies to change their ways. As a result of Oxfam’s work, RB itself is now calling on governments around the world to legislate to compel all multinationals to be transparent about the tax they pay though country by country reporting of key financial data.
Yesterday the European Parliament held a crucial tax justice vote on making multinational companies with an annual net turnover of 750 million euros and above publicly report their activities, structures and tax payments on a country-by-country basis. That would mean no more secrecy around those things that affect the welfare of you, me and the rest of the world on a daily basis. It would mean the end of the outrageous secret deals done with governments behind closed doors. Each country would know how much tax a multinational company contributes to their Treasuries. As they say, sunlight is the best disinfectant.
At TJN we have fought a long campaign on this issue, joined by many friends in the tax justice movement. When TJN first floated this idea along with Richard Murphy it was laughed at. Now we’re moving closer and closer to it. But we’re not there yet.
You can read more on the benefits of public country-by-country reporting here. And here’s why this issue is so important:
Last week the Tax Justice Network director Alex Cobham was invited to the United Nations in New York to address the ECOSOC Financing for Development Forum. Here are his remarks, which highlight a major threat to the Sustainable Development Goals target to reduce illicit financial flows. And what’s that threat? A concerted effort to remove multinational tax avoidance from the scope. In fact, there’s been some very active lobbying in order to exempt corporate tax dodging from the ‘illicit financial flows’ definition.
This is life and death stuff.
It’s said that if you’re not at the table, you’re on the menu. Well, the OECD has just made available the list of activated relationships to automatically exchange country-by-country reports between countries. They use big figures like 700 relationships, but don’t get fooled by those numbers – simply look at the image below to see who really has access to CbCR.
Oh, by the way, there’s nothing wrong with your eye-sight. Developing countries are just not there…
Source: Rasmus Christensen (https://twitter.com/phdskat/status/860093952992608256?s=09), by kind permission
The problem is that instead of requiring a fully multilateral approach, the OECD has allowed bilateral relationships to the automatic exchange of CbCR. This makes it harder for more jurisdictions to exchange CbCR, and more costly to arrange – and in practice results in the exclusion of nearly all lower-income countries:
Some jurisdictions also continue to work towards agreeing bilateral competent authority agreements for the automatic exchange of CbC Reports with specific partners under Double Tax Conventions or Tax Information Exchange Agreements
Now, think of a major country that doesn’t appear on the image and is definitely choosing the bilateral approach when it comes to non-OECD countries. Hint 1: its very many multinationals (MNEs) have aggressively pursued profit shifting, so that the misalignment of their global profits away from the locations of their real economic activity has gone from just 5% in the 1990s to more than 25% now. Hint 2: this country won’t be joining the CRS (the global framework for automatic exchange of banking information) either.
The OECD’s new terms of reference to assess the implementation by countries of BEPS Action 13 related to Country-by-Country Reports (CbCR) may penalise countries, especially developing ones, that try to obtain by their own means the CbCR’s valuable data needed to tackle multinational tax avoidance.
Country-by-Country Reports (CbCR) (to be prepared by multinationals with group revenues over EUR 750 million) will offer information on multinational economic activity, profits and tax paid broken down for each country where they operate. This CbCR “map” will reveal any misalignments between the location of real activity, and where profits are ultimately declared to hold both multinationals and tax havens to account.