Could EITI’s model of transparency be expanded to other sectors?
Clare Short EITI Chair was recently interviewed by Salman Shaheen from International Tax Review about how EITI’s model of transparency could be expanded to other sectors and the importance of country-by-country reporting. The interview is reprinted below with permission from International Tax Review.
Clare Short, chair of the Extractive Industries Transparency Initiative (EITI) and former UK Secretary of State for International Development, tells International Tax Review about her efforts to introduce country-by-country reporting and how the EITI’s model of transparency could be expanded to other sectors.
International Tax Review: Can you tell us about the latest developments in your work at the EITI?
Clare Short: The EITI remains committed to bring about transparency around the revenues that governments are receiving from natural resources. People have the right to know how much their government is receiving from their country's resources.
In the past six years, more than 30 countries have started disclosing revenues through the EITI. This information has shone a light on the question of how these revenues are being managed, but the EITI was founded on the belief that transparency would lead to enhanced accountability. We have more to do to enhance accountability.
ITR: Why are the extractive industries, over any other, being focussed on for introducing the reporting of payments to governments?
CS: Natural resources are different from other goods. They cannot be replaced, the extraction of them has environmental costs and in most countries they belong to the government, or rather, their citizens.
Many governments are receiving big payments from special taxes on oil, gas and mining operations. Yet, in many countries these resources are a curse rather than a blessing and tend to be linked to corruption, inequality and proneness to conflict.
Secondly, the extractives sector is huge. It accounts for around 7% of the world's GDP. And even more importantly, many countries - both in the north and in the south - are heavily dependent on revenues from this sector. If only this resource could be better managed, millions could be lifted out of poverty.
ITR: Could the model of EITI reporting you’re promoting for the extractive industries be expanded to cover companies in all sectors?
CS: The EITI methodology is flexible, so countries can chose to apply it to additional sectors, as needed.
In Togo they are applying it to the water sector and in Liberia to forestry and agriculture. I think we will start to see more examples like that of Togo and Liberia, but EITI itself will remain focused on the need for transparency in oil, gas and mining.
ITR: How much consultation and dialogue do you have with taxpayers?
CS: The EITI is a coalition between governments, extractives companies and civil society organisations. It is built on the belief that the best solutions are reached when all stakeholders sit around the same table.
Today more than 60 of the largest oil, gas and mining companies support the EITI on the international level, and are part of the governance of the EITI globally as are representatives of civil society across the world. The accountability to taxpayers comes at country level. Each EITI country has a local coalition supervising the reporting process and has a duty to disseminate the results.
ITR: Are businesses worried about too much reporting?
CS: I have heard no such complaint. Companies collect the figures for their own purposes, it is not much of a task to ask their auditor to certify the figures that are forwarded for the EITI report.
In general, large extractive companies with a long-term investment strategy will say to us that they are eager to disclose what they pay in taxes. Doing so, people can see how much their company is contributing to society. This builds trust and better relations with citizens and communities, which in turn improves business in the long-term.
ITR: Once country-by-country reporting has been adopted for the extractive industries, how will this change the EITI?
CS: The country-by-country tax disclosure requirement for companies listed in the US and the EU would complement the EITI but not replace it. EITI reporting is local and includes all companies not just those listed in the US and EU. And the new requirements will not require EITI's "double disclosure " where companies' payments and government receipts are independently reconciled and then published and debated by the public.
Addressing country-by-country reporting, Anglo American said in a recent report: "such a requirement will never achieve all that the EITI methodology sets out to achieve, but we believe that it can form an important complementary measure to the EITI".