Guidance Note: EITI Requirement 4.7
|This guidance note refers to the 2019 EITI Standard.|
Company payments to governments related to oil, gas and minerals are often levied on a project-level basis, i.e. per individual legal agreement giving rights to an extractive deposit. Government entities collecting such payments also record the receipts by project in their internal systems, often with the exception of general taxes such as corporate income tax, which is typically (but not always) levied and recorded by legal entity.
Public disclosure of payments and revenues by project (also called “project-level” or “project-by-project” reporting) enables the public to assess the extent to which the government receives what it ought to from each individual extractive project, because actual payments can be compared with the terms set out in the laws or contracts governing the project. Project data can help tax administrations address possible tax evasion or avoidance by shedding light on pricing arrangements and identifying risks of transfer pricing manipulation.
For host communities, it can contribute to show the benefits that each extractive project generates and can enable subnational government entities to calculate their share of project-level income. It can also assist governments in making more accurate forecasts for future changes in revenues. In terms of costs and benefits of project-level reporting in the EITI, it has been pointed out by government agencies in particular that reporting by project would be easier than current reporting of aggregates, as it would be more consistent with how governments levy and record payments or revenues. This could reduce time, costs and discrepancies in EITI Reporting. The investor community has also been supportive of project-level reporting, noting how such reporting can contribute to a more stable investment climate and improve investors’ ability to manage risk.
The EITI Standard requires that financial disclosures must be disaggregated by project for reporting covering fiscal years ending on, or after, 31 December 2018. This guidance provides a step-by-step guide on how to report “project-by-project”, including how to apply the definition of a project, how to identify the level of disaggregation for each revenue stream, as well as who should report.