Accepted paper:

Extractive industries' tax payments to developing countries' governments: evidence from country-by-country reporting data


Saila Stausholm (Copenhagen Business School)
Petr Janský (Charles University)
Marek Sedivy (Charles University)

Paper short abstract:

We analyse country by country data from three different sources on the extractives industry and find that the current reporting standards, while having high compliance, has such a narrow design that it is non-operational when it comes to present issues of tax avoidance.

Paper long abstract:

Following recent increased attention towards the tax payments of multinationals, OECD and the EU has started implementing Country By Country Reporting (CBCR) standards for the largest firms with global operations in certain industries. The use of CBCR provides transparency that enables governments as well as civil society to compare the tax payments and profitability to the value adding activities in each country, enabling analysis of whether there are any misallocations of profits that can indicate tax avoidance. However, the use of CBCR in the extractives industry is limited for this purpose. We evaluate the available data on the extractives industry and find that while compliance in reporting is high, it is impossible from the data to determine whether compliance in tax payment is high. We use three data sets to focus on the same payments:, and Orbis. We find that while all three sources of information do increase transparency, they are not easily combined, and real transparency is therefore limited. The reporting standard has not been designed for the purposes of ensuring against transfer mis-pricing and similar tax avoidance strategies. We therefore argue that a reconsideration of the requirements for publishing CBRC data in the extractives industries is needed, and should cover more aspects such as the scope of activities as well as the fiscal rules agreed on in the contract. This would enable civil society to use the data to hold governments accountable on receipts from multinational companies for exploiting natural resources.

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