*Historic EU Transparency Rules Would Build Upon Landmark Cardin-Lugar Provisions to Include Logging Companies and Large, Privately-Owned Firms
09 April 2013, WASHINGTON, DC – Global Financial Integrity (GFI) lauded European leaders today for agreeing to adopt historic transparency rules for European companies operating in the extractive sectors.
The rules, announced this evening in Brussels, will require large, privately-owned European companies and EU-listed firms operating in the oil, gas, mining, and logging sectors to disclose information on payments made to governments.
“This agreement is a major victory for anyone who cares about fighting poverty, protecting investors, making markets more efficient, or reducing corruption,” remarked GFI Director Raymond Baker. “Our research shows that the developing world loses roughly US$1 trillion per year to crime, corruption, and tax evasion. This is a systemic problem caused largely by the opaque, secretive global financial system. For citizens of resource-rich countries, the new EU rules will shine a light in places that need it most.”
The agreement will require firms covered by the rules to disclose on a project-by-project by project basis all payments made to governments above €100,000 (approximately US$131,000) including taxes-paid, royalty fees, and license fees.
Connections to Cardin-Lugar
The European agreement builds upon U.S. legislation passed in 2010, the Cardin-Lugar provisions (section 1504) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which requires all companies registered with the U.S. Securities and Exchange Commission operating in the oil, gas, and mining sectors to report on payments made to foreign governments.
Unlike the Cardin-Lugar provisions, the European rules will also cover large, privately-owned firms, and they will extend to companies operating in the logging sector. Moreover, the new rules would instruct the European Commission to consider extending the rules to more industries.
Extending the Rules
“While it’s important to enact transparency in the extractive industries, corruption and tax evasion are not exclusive to oil, gas, mining, and logging,” added Heather Lowe, GFI’s Legal Counsel and Director of Government Affairs. “The next step is extending these rules to require multinational companies operating in all industries to disclose profits earned, taxes paid, royalties, license fees, subsidiaries, and staff levels on a country-by country, if not subsidiary-by-subsidiary, basis.”
The European Union announced in late February that it would move to require all financial institutions to disclose profits made, taxes paid, subsidiaries, and staff levels on a country-by-country basis. GFI praised that move as progress and likewise urged the EU to extend those transparency requirements to all business sectors.
Final Approval Process
The transparency and accounting directives proposed today by the European Union still require formal approval by the European Parliament’s Legal Affairs Committee as well as the full European Parliament. Nevertheless, the rules were agreed to informally by negotiators from the Council, Parliament, and Commission, making it very likely that they will be formally adopted within the coming few months.
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