What is the big deal with extractives data and how can transparency stimulate domestic resource mobilisation?

EITI Global Conference: Plenary Session 5

Session Summary

The session showcased how transparency efforts including EITI increasingly focusses on developing a robust open government system and ensuring that open data permeates into the culture of implementing countries. Participants provided different perspectives of how extractives transparency helps government raise more revenues and in meeting emerging challenges in global revenue collection and management, including how this contributes to achieving the Sustainable Development Goals (SDGs) and the facing the energy transition challenge from the Paris agreement on climate.

Speakers

Moderator: Rt. Hon Helen Clark, EITI Chair

Speakers:

  • Mrs Hadjia Zainab Ahmed, immediate former Minister of Finance of Nigeria and former EITI Board member

  • Ms Jessica Uhl, Chief Financial Officer, Royal Dutch Shell Plc

  • Mr Jon Lomøy, Director General, Norwegian Agency for Development Cooperation (Norad)

  • Mr Filomeno Sta Ana III, President of Bantay Kita and Executive Director of Action for Economic Reforms, Philippines

  • Mr Jean-Pierre Marcelli, Director of Operations, Agence Française de Développement (AFD), France

Session Details

Where oil, gas and minerals are managed well, these resources can mobilise domestic resources by providing opportunities for employment, business development, domestic capital formation and increased fiscal revenues. The importance of domestic value creation and government revenues in a post-aid world cannot be over-emphasized. EITI member countries have reported more than USD 2.45 trillion in government revenues, demonstrating the importance of the extractive sector in mobilising revenues to meet the Sustainable Development Goals, estimated to cost roughly USD 2.5 trillion per year. Granular, timely and open data provides a basis for civil society to hold governments and companies accountable.

Domestic resource mobilisation is that the core of the EITI of the process. The EITI helps member countries raise more revenues, through multiple efforts including:

  • Improved and comprehensive reporting on the sector’s contribution to the economy, not just limited to taxes and royalties.

  • Improved tax policies based on empirical evidence and government agencies’ ability to collect revenues. EITI reports routinely identify gaps in government systems and help improve these systems, making more effective and accountable.

  • Improved monitoring by the citizens of the revenue flows between companies and governments, reducing the risk of both tax evasion and corruption.

  • Expand the tax base by improving the business environment and foreign direct investment. Give companies confidence that their payments are not diverted to corruption. EITI can also help increase companies’ compliance with the fiscal regime through reporting and regular engagements with companies.

  • Provide governments and citizens tools to fight tax evasion through comparative analysis of empirical data and independent reconciliation reports.

Examples from governments were provided from Nigeria, Norway and France. In Nigeria EITI has contributed to improve several government functions, including the financial record-keeping by moving from as the revenue authority’s tax collection system has been enhanced as Nigeria EITI uncovered various gaps; and better coordination between government agencies as a result of Nigeria EITI’s efforts as a multi-stakeholder platform. The work of EITI has also helped Nigeria in recovering revenues by also reviewing whether the taxes paid are equivalent to the taxes owed. Lastly, the speaker referenced how the state-owned enterprise, NNPC, has increasingly reported at monthly and annual basis, on production and sales of crude oil.

The company representative from Shell highlighted the importance of bringing transparency and good governance to the natural resource sector. Both in terms of a multi-stakeholder society, as well as climate change, showing what companies really do was hailed as most effective to show what contributions companies are making to society. References were made to the importance of transparency in contracts and licenses, beneficial ownership, and in payments to governments, in order to show how present-day energy companies contribute to funding government services, in addition to energy transition.

The government representative from Norway shared some of their two-fold experience of being an implementing country, and a development partner sharing their experiences as OECD’s most resource-dependent country. The examples emphasised the importance of change happening in a society with a surplus of trust, which has the capability of absorbing the tensions arising from windfall revenues from extractives. This is also seen as related to a vibrant civil society and international cooperation. The former to ensure that voices are heard and to push the agenda forward, the latter to ensure wide collaboration to learn from other countries’ and organisations’ experiences and expertise.

The civil society representative from Philippines stressed that transparency and financing development goals are intermediate goals, but absolutely critical. EITI was portrayed as a sign of good housekeeping, which enhances corporate tax compliance and attracts companies that value their reputation and social license to operate. Another point was made that civil society, those who guard the guardians, bring their concerns to the table; even if outside of finance and economics. Communities and indigenous people highlight the political, social and ecological issues that, while springing from a platform of revenue transparency, transforms EITI to and all-round development affair. This also exemplifies the challenges associated with narrowing civic and democratic space occurring in several countries.

The last contributor, a representative from the French Development Agency (AFD), highlighted three major challenges related to revenue collection from the extractive sector: (i) the tax base is often too small, when companies get away with paying less-than-fair shares, (ii) the question of trust is paramount, as companies and governments with open and transparent finances are easily subject to public scrutiny and accountability, and (iii) the issue of tax evasion, which impacts all countries regardless of geography. The representative lastly emphasised the importance of financing the energy transition and all its related issues; by ensuring subnational agencies allocate resources to mitigate effects of lower employment in carbon-heavy industries and to protect people in climate-reliant sectors.

The moderator and EITI Chair made the point that EITI has to fit into the many and different global agendas, and stressed that it can contribute to assist in making progress on some of them. Global commitments such as the Paris agreement and SDGs will require broad support and funding, which EITI can support through its multi-stakeholder platform, and in improvements to revenue administration of governments and companies.