Brussels, 21/04/2010 (Agence Europe) - On Wednesday 21 April 2010, the European Commission published a report on encouraging good tax governance in developing countries, one of a series of strategic documents to help the European Union prepare for the September 2010 United Nations (UN) summit revising the Millennium Development Goals (see related article).
In many developing countries, the tax-to-GDP ratio ranges between 10% and 20%, as opposed to 25% to 40% in developed countries. The Commission explains that: 'In order to enhance transparency and facilitate access to relevant data by tax offices in developing countries, there is an increasing interest in a country-by-country reporting (CBCR) accounting standard for multinational corporations operating in developing countries.' At present, tax information is only available at regional or continental level. 'Since multinational corporations are not required to disclose their financial data on a country-by-country basis, enterprises may try to lower their tax liability in developing countries, notably through transfer pricing practices,' explains the Commission. The Commission says it 'supports the timely conclusion of ongoing work being done by the OECD with respect to a CBCR guideline, which should then be referred in the OECD Guidelines for Multinational Enterprises and in the OECD Principles of Corporate Governance. Moreover, the Commission supports research work currently undertaken by the International Accenting Standards Board towards the possible inclusion of CBCR in an International Financial Reporting Standard for extractive industries and encourages further investigation...' The Commission will soon be publishing a report on corporate social responsibility, looking at how to introduce compulsory reporting of governance data in companies' annual accounts.
According to a Norwegian government commission, illegal money flows from developing countries to tax havens totalled USD 641 billion to USD 979 billion in 2006, thus at least seven times higher than official development aid. The Commission suggests increasing tax dialogue and cooperation at multinational level and by encouraging developing countries to take part in the work of international bodies. It will continue to encourage the introduction of good tax governance principles in cooperation deals between the EU and other countries. The Commission says it is prepared to provide technical expertise to help developing countries which so desire to implement exchange of tax information deals and double taxation agreements. (M.B. trans fl)