The study by anti-corruption group, Transparency International, gave the 105
top publicly-traded companies scores out of 10 for their public
commitment to transparency, based on public availability of
information about anti-corruption systems, transparency in
reporting on how they structure themselves and the amount of
financial information they provide for each country they
Statoil topped the list as the most transparent company with a score of 8.3,
followed by Rio Tinto, which is a member of Transparency
International's Business Principles Steering Committee. Google
and Microsoft, also supporters of Transparency International,
came near the bottom of the list at 2.9 and 3.4 respectively,
while the Bank of China was at the bottom of the rankings with
a score of 1.1.
One area where companies scored almost universally poorly
was on country-by-country reporting, showing that
while companies have acted to stamp out corruption, the area in
which they are least transparent is tax.
Even Statoil only scored 50% on this measure, while 41
companies scored 0%. The average was 4%.
"Companies tend to aggregate their accounts only by region
for reporting purposes, even though country-level data is
available to them," the report states. "While regional
presentation may be easier, valuable detail is lost in the
Transparency International looked at five areas of financial
reporting on a country-by-country basis: revenues, capital
expenditure, income before tax,income tax, and community
contributions. Among the selected companies, only four
disclosed some of the financial data in all countries in which
they operate: Statoil, Tesco, Rio Tinto and BHP Billiton.
Rio Tinto, an active supporter of the Extractive Industries Transparency
Initiative (EITI), was found by the report to disclose the
amount of taxes paid on a country-by-country basis for all
countries in which it operates.
Despite this, Chris Lenon, group strategic adviser on tax
policy at Rio Tinto, is opposed to mandatory full
country-by-country reporting which would see all multinationals
publicly declare a profit and loss account, taxes paid, and
people employed in each jurisdiction in which they operate.
"I don't believe that this is a sensible proposal," said
Lenon. "The information suggested will not be enough to
calculate whether the 'right' amount of tax has been paid,
though the compliance burden will be huge."
The perceived compliance burden is one of the main arguments
used by business against mandatory country-by-country
reporting, but Richard Murphy, the accountant who devised the
standard, does not believe this objection has much weight.
"Firstly, companies have to have
this data or they cannot now be meeting their internal control
obligation to properly prepare their tax returns," he says.
"Secondly SAP and other computer specialists tell me this would
not be hard to generate as a consolidation - after all, every
country has to prepare consolidation data identifying
intra-group trading already."
Murphy believes that the cost
would not be significant bar auditing.
"Auditing is an issue - but
right now the fact that whole vast areas of MNC activity is
simply not audited at all transfers that risk onto
shareholders," he says. "That's not good enough. It belongs in
the company. The small cost of extra auditing is a price well
worth paying for the lower cost of capital that better
assurance and more information would supply."
That even Lenon, who has engaged more readily than most
taxpayers with the drive towards greater transparency, is
opposed to this level of reporting shows how far companies have
to go to be as tax transparent as the report's authors would
"If country-level financial information is not adequately
disclosed, it is difficult to know how operations in many
developing countries contribute to local governments," said
Jermyn Brooks, chair of Transparency International's Business
Advisory Board. "Experience has shown that the requirement to
report encourages companies to build strong management systems
supporting disclosures, and in the process improving their
By far the most transparent sector is the extractive
industries, which is hardly surprising considering the
reporting requirements of the EITI, the Dodd-Frank Act in the
US and the EU's impending measures to expand upon Dodd-Frank.
Financial institutions, including HSBC, a member of
Transparency International's Business Principles Steering
Committee, and scandal-hit Barclays, were among the lowest
ranked companies for country-by-country reporting.
If other industries are to be made as transparent as the
extractive industries, country-by-country reporting may have to
be rolled out to all sectors of the economy.
For more on tax transparency and what it means for your
business, see the July/August issue of International Tax