A U.S. multinational corporation mines natural resources in Africa and sells it in the United States and Europe. It sets up a complex array of subsidiary companies, each with a different name, in tax havens across the world.
The corporation shifts billions in profits to those tax haven subsidiaries, thus avoiding tax in countries with stronger regimes.
When it publishes its annual report, the multinational rolls up all the information from each country – trading, profits, tax payments. – into one big lump.
No-one – governments, the public, even investors and shareholders – knows what happened where.
With this piece of accounting trickery, a huge black hole has been created in corporate accounts.
Enter Country by Country Reporting!
Under country by country reporting, the multinationals would have to break their information down by country of operation – including in each tax haven – so that citizens and authorities can see what the corporations are doing in their countries.
With this single accounting measure, countries, rich and poor, will be able to call multinational companies to account at last.
Countries could tax the companies properly. They could fund the schools, roads and hospitals their citizens need, without having to beg for aid.
Country by country reporting: a blast of transparency that could change the world.