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Extractives companies champion tax transparency

Good practices by EITI supporting companies

EITI supporting companies are breaking new ground with public country-by-country reporting

Oil, gas and mining companies currently disclose detailed information about payments to governments in 54 EITI implementing countries. Extractives companies based in the EU, Canada and Norway are also required to disclose information on government payments from their global operations.

Some EITI supporting companies have decided to promote transparency even further. Shell, Eni, BHP, Repsol and Rio Tinto are among a group of companies that now publish “country-by-country reports”. These summarise a company’s economic activity in each jurisdiction where they have presence and disclose taxes on profit.

Beyond “payments to government” reporting

The new reports provide additional information on revenues, profits or losses, employment, assets and stated capital in each country of operation. This information about the company’s economic activity in each jurisdiction helps put the level of payments in context. The reports also capture information about the company’s presence in low tax jurisdictions.

Some of the information disclosed in the new reports, however, is not as detailed as information in the “payments to governments” reports mandated in the EU, Canada and Norway. Disclosures covering non-tax payments, for example, are generally not included.

Disclosures by country: a simplified guide


EITI reporting

“Payments to governments” reporting

Country-by-country reporting

Which companies report?

All oil, gas and mining companies making material payments in the 54 EITI implementing countries. Legally required in some countries, such as Armenia, Liberia, Nigeria, Tanzania and Ukraine.

Large extractives companies registered in Canada, the EU or Norway. The US is introducing regulations to Section 1504 of the Dodd-Frank Act that relate to payment transparency.

Voluntary public disclosure. In 90 countries, it is mandatory for large multinational companies to submit a confidential country-by-country report to the tax administration in accordance with BEPS Action 13. Featured also in the new GRI Standard on Tax.

What does the reporting cover?

Material payments in the EITI country, disaggregated by company, project, recipient agency and revenue stream. In addition, data on contracts, production, exports, beneficial owners, and other areas covered by the 2019 EITI Standard.

Material payments resulting from extractives operations, disaggregated by recipient government, project and type of payment.

Taxes on profit and key indicators related to the level of economic activity, such as revenue, profit/loss, stated capital, employment. Disaggregated by tax jurisdiction.

Why disclose? A company perspective

Eni and Shell are among some of the major international oil and gas companies that are pioneering country-by-country reporting.

Both companies recognise that the benefits of detailed reporting are to inform stakeholders, build trust and contribute to a broader discussion on tax transparency. Through public country-by-country reports, Eni and Shell demonstrate that they are living up to these commitments.

According to Eni's Head of International Tax, Giorgio Bigoni, "the Country By Country Report is a powerful instrument which enables stakeholders to acquire knowledge regarding the countries where Eni companies operate and the corresponding amount of taxes paid, consistently with the value of the extractive activities generated therein."

“The payment of the right amount of tax at the right time in each country where we operate, as well as a proper compliance fulfilled by a tax determination based on both the letter and the spirit of the law, are among the fundamental principles of Eni’s Tax Strategy,” said Bigoni.

Shell’s Executive Vice President Taxation and Controller as well as EITI Board member Alan McLean highlighted the company’s commitment to the B Team Responsible Tax Principles. One of the principles focuses on being transparent about the company’s approach to tax and taxes paid. “Our Tax Contribution Report aims to show how we are applying the B Team Responsible Tax Principles, an initiative Shell signed up for in 2018 to more closely align our tax strategy with emerging best practice.”

Both companies believe their respective reports represent a significant step in improving transparency.  “Publishing the country-by-country report confirms Eni’s commitment to transparency,” affirmed Bigoni, while Alan McLean added: “we see Shell’s report as a further step towards greater transparency.”

As EITI supporting oil and gas companies, Eni and Shell are expected to publicly disclose taxes and payments, in accordance with the Expectations for EITI supporting companies. Through the publication of country-by-country reports, both companies demonstrate their commitment to uphold and champion this expectation.

Stakeholder perspectives

The country-by-country reports are a welcome development among both company and non-industry stakeholders. “There is definitely a sense that we have turned a corner on company transparency and that strengthening the current framework for public country-by-country reporting now has taken on a dynamic on its own,” said Sigrid Klæboe Jacobsen, Executive Director of Tax Justice Network Norway. “It is now proving its value for a broad set of stakeholders, including investors and tax officials.”

Companies have also observed the benefits of this new type of reporting. “The overwhelmingly positive staff reaction to Shell's Tax Contribution Report went beyond our expectations,” said Alan McLean. “Having the interest and support of our employees continues to motivate us in our work in tax and beyond.” Eni remarked that their reporting has spurred dialogue, prompting various organisations to inquire about specific issues included in their country-by-country report.

Yet there is still progress to be made, according to Tax Justice Network Norway. “There is much work to be done to ensure that data is recorded, audited and published in a standardised way,” said Jacobsen. “We want country-by-country reporting to include a broader set of data to give context to the tax information, and for this to be being expanded into all business sectors.”

A multiplier effect: shaping industry-wide expectations

Major international energy companies have the potential to influence transparency norms. Recent country-by-country disclosures by companies are moving the needle on corporate reporting criteria. Shell underscored their aspiration that the emerging practice of country-by-country reporting could carry the global tax transparency discussion forward with other companies, and contribute to fair, effective and stable tax regimes that benefit society at large.