PWYP Norway's transparency demand and arguments get massive support from other consultative bodies, including Finance Norway, The Norwegian Accountant Organization, Media Companies National Association, Norwegian Editorial Association, Norwegian Journalist Association, Norwegian Press Association.
On December 7th the deadline went out on delivering consultation responses on the evaluation report “Evaluering av LLR regelverket” (evaluation of the Country-by-Country reporting (CBCR) regulations), which was prepared by the accountancy firm Deloitte AS. The Ministry of Finance has outsourced an evaluation of the CBCR regulations to the accountancy firm, that conducted a survey based on questionnaire with a four-day deadline. The accountancy firm Deloitte suggests splitting the regulations (without explaining what the advantage (for whom?) would be. The Ministry of Finance then sent the proposal to hearing.
33 consultation responses were delivered, of which there were 23 inputs with notes. Of the 23 consultation responses with notes, 18 of the consultation responses supported PWYP Norway`s demand for transparency.
Consultation papers, consultation notes, all consultative bodies, and all consultation responses are available at the Ministry of Finance`s website here (in Norwegian).
PWYP Norway has worked to adopt the amendment for extended country-by-country reporting for ten years. The amendment will make sure to make transparent where mailbox companies are registered and capital is built up.
Read: Opinion piece in DN, September 13th, 2017: Should report on mailbox empires and opinion piece in Klassekampen, November 18th, 2017: Tax haven clause in Sleeping Beauty slumber.
Massive support
In its consultative input, PWYP Norway argued that the report does not evaluate, nor can it evaluate, the objective of making transparent tax adjustments because the mechanism for such a transparency is still not in place.
PWYP Norway opined in their consultation response that there is no need to differentiate between regulations for transparency of payments to authorities versus regulations for transparency of unwanted tax adjustments – the regulations are already separate.
PWYP Norway`s recommendation to the Ministry of Finance was clear: stop fooling around, implement the reporting requirements in accordance with §4, paragraph 3 independent of the materiality limit in §4, paragraph 2. If it is desirable to get more companies onboard to report in accordance with extended country-by-country regulations and validate universally the amendment for all companies over the materiality limit, allow the extracting industries and the forest companies to merely report one extra figure beyond what everyone else has to do: production. This fixes both transparency of unwanted tax adjustments and ensures that there is only one set of regulations to deal with.
Read: Finansdep_horingsbrev_LLRevalueringenDeloitte_PWYPNorge09NOV2017.pdf (In Norwegian)
Consultative bodies that support PWYP Norway`s arguments – a summary
Positive movement
The Norwegian Auditing Association (Den norske Revisorforening) is of the same opinion as PWYP Norway concerning the materiality limit which functions as an exception for reporting in tax havens. The Norwegian Auditing Association believes that the materiality limit should be repealed and writes the following in their consultation response:
“Therefore we believe that the exemption clause should be repealed. The special Norwegian demand in amendment §4, paragraph 3 is important in order to place payments into context, including making transparent unwanted tax adjustments. If the materiality limit is abolished, branches will also be covered by the reporting requirement, which we believe is expedient. Currently branches are left out of CBCR if the payments do not surpass 800,000 NOK.
If the ministry believes an exemption clause is necessary, they should consider tying it up with other criteria than “payments” alone.” (Translated by PWYP Norway)
The Norwegian Auditing Association believes that in order to create more transparency on unwanted tax adjustments, CBCR should apply to all business independent of industry.
The Norwegian Auditing Association does not support Deloitte`s proposal on dividing the regulations. Instead they recommend removing the materiality limit:
“We are unsure if a division will make transparent tax adjustments and because of this, do not recommend a division. We believe a more effective transparency on unwanted tax adjustments can be achieved by removing the materiality limit in the amendment §4, paragraph 2, and that the reporting requirements not be limited to businesses that operate extraction of non-renewable natural resources. Additionally, the disclosures in amendment §4, paragraph 3, 1. sentence should also be made valid for the group reporting which follows the amendment §5, paragraph 3.” (Translated by PWYP Norway)
Read consultation response from The Norwegian Accounting Association:
(In Norwegian)
The Norwegian Financial Analysts' Association acknowledges that analysts and investors can find useful additional information in CBCR, but CBCR in its current form is still of limited value to analysts:
“Analysts and investors can find useful additional information in country-by-country reporting. To a large degree this is viewed as investors` increasing focus on sustainability, which currently is increasingly implemented in connection with company analyses with investment banks.” (Translated by PWYP Norway)
Fears double reporting
Økokrim (Norwegian National Authority for Investigation and Prosecution of Economic and Environmental Crime) opines in their consultation response that exceptions to avoid reporting from tax havens should be repealed:
“The exception from the duty to report when payments to authorities does not exceed NOK 800,000, ref. amendment §4, paragraph 1 and 3, means that in practice reporting is done acc. §4, paragraph 3 for activity in low-tax countries to a significant lesser extent than consideration to the rules would indicate. We believe that this duty to report is important in order to see payments in context and make transparent unwanted tax adjustments. In our view the exception should be repealed.” (Translated by PWYP Norway)
Økokrim also does not support Deloittes` proposal to divide the regulations and writes the following:
“CBCR reporting is addressed in several provisions. For the reporting entities we assume that it has an inherent value that the reporting requirements are as coordinated as possible. Payments to authorities and tax adjustments are related. We assume that two separate sets of regulations will lead to double-reporting. In our view, the two regulations should not be separated.” (Translated by PWYP Norway)
Read consultation response from Økokrim here. (In Norwegian)
Financial sector is for transparency
Finance Norway, in their consultative input, subscribes to the same message as PWYP Norway on reporting from tax havens and Deloittes` proposal to divide the regulations. Finance Norway sums it up in the following input:
- We believe that §4, paragraph 3 in the amendment on country-by-country reporting should be amended so that information on the companies` investments, sales revenue, production volume, and expenses should be reported regardless of whether there is a duty to inform on payments to authorities in the country in question. This will contribute to make the use of tax havens for unwanted tax adjustments visible.
- We do not support the recommendation in the evaluation report to divide regulations aimed at payments in the extracting industries from regulations that are aimed at making tax adjustments transparent since these regulations are closely related. In order to expose unwanted tax adjustments, payments to authorities must be seen in connection with the activity in the country in question. (Translated by PWYP Norway)
Read consultation response from Finance Norway:
Global Financial Integrity (GFI) is the leading American think tank in the area of capital flight. It is their number-crunching that is used as a basis in the debate in international forums and EU. GFI refers to exceptions in the current amendment and warns that unless the amendment is fixed, the amendment can have the opposite result, namely that fewer companies will report from tax havens, and suggest the following:
”As currently written Article 4, paragraph 2 states that “when there is a duty to provide information about payments to authorities, the report shall contain information about the enterprise’s investments, sales income, production volume and costs, broken down by country in which the enterprise operates.” The phrase “when there is a duty to provide” is triggered when a company pays more than 800,000 kr in tax in a single jurisdiction. In the case of a company operating in a tax haven there would be no duty to report on its activities due to a lack of taxes paid. This loophole, which allows a firm to shield its financial activities from view, should be closed in order to provide transparency in all corporation operations regardless of the amount of tax paid so that the spirit of the law is fulfilled.
A simple fix to this issue would be to change the phrase to read “regardless of a duty to provide”. This would make all components of the law, including the sections related to corporate operations in tax havens, consistent with §5, paragraph 3 which indicates companies are required to report their financial activity regardless of the amount of tax they pay. The irony of the current language, if it were to remain unchanged, is that it could actually prompt more companies to create tax haven entities thereby increasing financial opacity within a law meant to achieve the opposite result.”
Read consultation response from GFI here.
Investorer vil ha åpenhet
KLP Asset Management AS supports PWYP Norway`s proposal for change of amendment in order to make unwanted tax adjustments visible, and writes the following in their consultation response:
“It is difficult to understand that regulations that have as its target to reveal unwanted tax adjustments through jurisdiction with low or no taxes, exempt exactly these jurisdictions from the requirements of extended country-by-country reporting. For this objective it is especially relevant to make transparent where a company`s activities do not trigger a tax liability. It is difficult to reconcile the application in the current country-by-country regulations with the objective of revealing unwanted tax adjustments. As a result, we support PWYP Norway`s proposal for changing the amendment to make unwanted tax adjustments visible.” (Translated by PWYP Norway)
KLP also supports PWYP Norway`s view on the requirement for publishing extended country-by-country reporting.
KLP joins the Norwegian Association of Financial Analysts` consultative statement on the subject of accounting figures and writes the following:
“As of today, it is a challenge that the figures for country-by-country reporting cannot be reconciled with the companies` remaining accounting figures. This is why the usefulness of this information is currently very limited for financial analytical purposes. KLP joins Norwegian Association of Financial Analysts` consultation statement on this topic.” (Translated by PWYP Norway)
Read consultation response from KLP:
(In Norwegian)
The media wants transparency
The Media Companies' National Association refers to the same weaknesses in the amendment as do PWYP Norway, and writes the following:
“The binding between the amendment`s §4, paragraph 3 and §4, paragraph 2 must therefore be revoked. This can easily be done at the beginning of the first sentence in amendment §4, paragraph 3 by changing “When there is a requirement to give information…” to “Regardless of whether or not there is a requirement to give information…”.
CBCR regulations can and should become the norm to include all companies over the materiality limits. The only thing that extracting industries need to specially report on is production. All other figures should be reported for all the companies.” (Translated by PWYP Norway)
The Media Companies' National Association also believes that reporting must be part of the annual accounts:
“A rule that the CBCR figures are included as notes to the accounting could replace the very unfortunate proposal that publication should be left to the companies themselves on their own website, and that the requirement to keep figures available doesn`t extend for more than five years. This latest comment is in the report`s point 8.4.” (Translated by PWYP Norway)
Read consultation response from the Media Companies National Association:
(In Norwegian)
The Norwegian Editorial Association, Norwegian Journalist Association, Norwegian Press Association agrees with PWYP Norway in their consultation response that exemptions for reporting from tax havens must be removed and writes the following:
“In today`s amendment there exists exceptions that practically undermines much of the intent of a strengthening of the regulations, and which also – as we understand it – is contrary to Parliament`s petition resolution. The amendment operates with a limit of 800,000 before the reporting requirement in §4, paragraph 1 kicks in. Even more problematic, in §4, paragraph 3 a requirement is made to report various information only where there is “a duty to provide information about payments to authorities.” Practically speaking, this excludes reporting from most tax havens, which is clearly unfortunate, and which we also believe contradicts Parliament`s petition resolution.” (Translated by PWYP Norway)
Norwegian Editorial Association, Norwegian Journalist Association, and Norwegian Press Association support PWYP Norway`s proposal that the reporting must become part of the annual accounts:
“We are on the whole very sceptical that the CBCR amendment`s reporting occurs through a separate document, formally disengaged from the annual accounts, and where information “…as widely as possible should be collected from the annual accounts”, ref. amendment §4, paragraph 3. We fully support PWYP Norway`s view that all figures in the reports should be collected from the annual accounts that are submitted to the auditor. This is of great importance so that among other journalists can verify and get secure figures to go by. A separate report, where only “selected figures” are included from the annual accounts, is not good.” (Translated by PWYP Norway)
They agree with many of PWYP Norway`s arguments presented in its input:
“We agree with PWYP (Norway) pointing out that the report can hardly fill an important part of its intended function, that is to consider the specific Norwegian reporting requirements “which are established to contribute to making unwanted tax adjustments visible, are considered effective…” This, as PWYP correctly points out, is not possible until regulations realistically trying to meet such an objective are actually in place. What has now been evaluated are regulations that catch a limited amount of information within a limited scope. One has thus tried to evaluate something that does not exist. That is difficult.” (Translated by PWYP Norway)
Read consultation response from the Norwegian Editorial Association, Norwegian Journalist Association, Norwegian Press Association:
(In Norwegian)
Schibsted Media Group joins the consultation response delivered by the Media Companies` National Association, Norwegian Journalist Association, and Norwegian Press Association:
“When it comes to views on the simplicity of the evaluation which is at hearing, we share the input the Media Companies` National Association has delivered, in addition to the common answer provided from the Norwegian Press Association, Norwegian Journalist Association, and Norwegian Editorial Association.” (Translated by PWYP Norway)
Schibsted Media Group highlights the need for equal competitive conditions in their consultation response:
“It is on the basis of this that Schibsted believes it is essential to do something about a tax regime that creates highly unequal competitive conditions and that favours the international giants.” (Translated by PWYP Norway)
Read consultation response from Schibsted Media Group:
(In Norwegian)
The organizations want transparency
Transparency International Norway (TI Norway) opines in their consultation input that CBCR regulations must be in harmony and not be divided, figures in CBCR must also be found in the companies` audited annual accounts, the core of reporting entities must be expanded, societal contributions must be explicit in the amendment wording, and exceptions for payments under 800,000 must be removed.
TI Norway supports PWYP Norway`s proposal of a regulatory amendment and writes the following:
“TI Norway is critical to the exemption for payments of 800,000 to authorities, and propose that it is removed. If Parliament`s objective to “make unwanted tax adjustments visible” shall be realized, one cannot have a rule where undertakings avoid reporting duty from countries where they generate large revenue, but don`t pay taxes, including most zero and low-tax countries (tax havens).
PublishWhatYouPay Norway suggests a concrete way to solve this by amendment §4, paragraph 3 changing from “When there is a duty to provide information…” to “Regardless of whether there is a duty to provide information…”. TI Norway supports this proposal.” (Translated by PWYP Norway)
Read consultation response from Transparency International Norway:
(In Norwegian)
Redd Barna (Save the Children) supports TJN Norway`s and PWYP Norway`s consultation inputs and urges that the CBCR legislation be harmonized, not divided up, that CBCR is expanded to all sectors and the amendment removes the existing “tax haven loophole”:
“That the legislation currently allows companies to avoid reporting from countries where they pay less than 800,000 NOK in taxes to authorities is incomprehensible. That they pay so little in taxes is precisely the incentive the company has to utilize tax havens! Accordingly, we recommend, in line with PWYP`s proposal, that the connection between the amendment`s §4, paragraph 3 and §4, paragraph 2 is repealed so the companies are forced to report: “independent of whether or not there is a duty to provide information on payments to authorities…” (Translated by PWYP Norway)
Read consultation response from Redd Barna:
(In Norwegian)
Changemaker in their consultation response supports PWYP Norway`s proposal to make the reporting duty according to §4, paragraph 3 independent of the materiality limit in §4, paragraph 2, and writes the following: “On the basis of this the committee recommends support of PWYP`s proposal to change §4, paragraph 2 to:
“Independent of whether or not there is duty to give information about payments to authorities, the report will also contain information about the entity's investments, sales revenue, production volume, and expenses, distributed among the individual countries where activity has occurred.”
A change like that could seal a large hole in the regulations which currently is not caught, because companies currently do not have to report from tax havens if they pay less than 800,000 in taxes to authorities. It is apparent that companies can have huge revenue in tax havens, without paying taxes there.” (Translated by PWYP Norway)
Changemaker does not support Deloitte`s proposal to keep regulations tied to tax purposes and country-by-country regulations for the extracting industries separate and argues that all sectors should report CBCR.
Read consultation response from Changemaker:
Kirkens Nødhjelp (Norwegian Church Aid) supports TJN Norway`s and PWYP Norway`s consultation responses. In its consultation response, Kirkens Nødhjelp opines that the amendment should be extended to encompass all sectors, in addition the ministry should consider lowering the cut-off in turnover and have CBCR reporting included as a note in the accounting. KN refers to PWYP Norway`s consultation statement about changing the amendment so that companies must report from all countries:
“The amendment should be altered so that companies must report from all countries where they have activity regardless of whether or not they pay taxes there. Reference is given to PWYP`s consultation statement on changing §4, paragraph 3. This would make it easier to uncover unwanted tax adjustments.” (Translated by PWYP Norway)
Read consultation response Kirkens Nødhjelp:
(In Norwegian)
Tax Justice Network – Norway supports PWYP Norway`s proposal on formulating the CBCR amendment and writes the following:
“Companies can have large revenues in tax havens, without paying taxes there. This is why it is most unfortunate that the amendment does not require companies to report revenue in countries where they pay less than 800,000 NOK in taxes to authorities. This is known as the “tax haven loophole” in country-by-country reporting. This condition should be removed. The reporting duty according to §4, paragraph 3 should be independent of the materiality limit in §4, paragraph 2. Accordingly, we support PWYP Norway`s proposal of altering §4, paragraph 3 to: “Regardless of whether or not there is a duty to give information on payments to authorities, the report shall contain information on the entity`s investments, sales revenue, production volume and expenses, distributed among the individual countries where activity has occurred.” (Translated by PWYP Norway)
Tax Justice Network – Norway also believes that CBCR should be expanded to all sectors, and do not support Deloitte`s proposal to divide the amendment.
Read consultation response fromTax Justice Network - Norway:
(In Norwegian)
Fellesrådet for Afrika (Norwegian Council for Africa) supports PWYP Norway`s proposal concerning changes in the CBCR regulations, but not Deloitte`s proposal to divide the regulations and writes the following:
“We refer to Tax Justice Network – Norway and Publish What You Pay Norway`s consultative inputs, which largely summarize Fellesrådet for Afrika`s objections. We still allowed ourselves to summarize our main message and input for the further work with reporting.
- The reporting circuits must be expanded so that CBCR can function according to its original purpose of stopping aggressive or illegal tax planning. It is unfortunate that the evaluation did not take a position on this, given signals from the ministry. All sectors should be incorporated in the reporting.
- We support PWYP`s proposal for how loopholes in the reporting can be sealed.
- Changes to the reporting should at this point concern harmonizing, guidance, and clarification, not split along partial objectives.” (Translated by PWYP Norway)
Read consultation response from Fellesrådet for Afrika here. (In Norwegian)
The Norwegian Tax Administration wants transparency
The Norwegian Tax Administration (Skattedirekotratet) writes in their consultation statement that the regional office in their day supported implementation of CBCR and extended reporting requirements:
“The regional department in the Tax Administration has gone through chapter 6 in the evaluation report on CBCR. The Tax Administration in their day supported implementing CBCR and extended reporting duty. However, they have no comments about the evaluation report except that the implementation of CBCR has given some preventative effect on making transparent aggressive tax planning in addition to a hindrance of economic crime.” (Translated by PWYP Norway)
Read consultation response from Skattedirektoratet here. (In Norwegian)
Trade unions want transparency
Industri Energi supports PWYP Norway`s proposal that can seal the holes in the existing CBCR amendment. Industri Energi writes the following in their consultation response:
“PWYP Norway has two concrete proposals what can correct the defect, and Industri Energi supports these.
- Amendment §4, paragraph 3 is changed FROM “When there is duty to provide information on payments to authorities, the report should also contain information on the entity`s investments, sales revenue, production volume and expenses, distributed among the individual countries where activity has occurred.” And TO “Regardless of whether or not there is a duty to provide information on payments to authorities, the report shall also contain information on the entity`s investments, sales revenue, production volume and expenses, distributed among the individual countries where activity has occurred.”
- ECBCR – extended country-by-country reporting (§4, paragraph 3) is given as notes in the financial statements, while at the same time it is voluntary if CBCR – country-by-country reporting (§4, paragraphs 1 and 2) is made in the same note or in its own report with reference to the annual accounts.” (Translated by PWYP Norway)
In addition, Industri Energi questions the legitimacy of the author of the evaluation report, does not support Deloitte`s proposal to divide the report. Industri Energi also opines that extended country-by-country reporting can and should be made universally valid to include all companies above the materiality limits.
Read consultation response from Industri Energi:
(In Norwegian)
LO (The Norwegian Confederation of Trade Unions) points out in their consultation response that they have in several consultation responses promoted “the need for an extension of the reporting to also include other sectors”. LO does not support Deloitte`s proposal to divide the reporting and writes the following:
“In LO`s view, the easiest way to fulfil Parliament`s target is that Norwegian companies that have businesses in several countries, add a note to their annual accounts that shows revenue, expenses, and paid taxes for each individual country where the company has any business. This can be done without creating a whole separate report. Extracting industries must in addition report on production.” (Translated by PWYP Norway)
Read consultation response from LO:
(In Norwegian)
The oil industry, NHO and Norsk Hydro want “harmonizing” and is against “special” Norwegian requirements
Norwegian Oil and Gas Association believes that the Norwegian legislation should harmonize with international regulations and in particular EU regulations, and that it is unfortunate with special Norwegian reporting requirements in the CBCR amendment:
“Norwegian Oil and Gas Association shares this view and is of the opinion that the regulations as they are currently formulated with the most recent changes from 2017, must take time to work before additional changes are made. The reporting requirements are already extensive, and as Norwegian Oil and Gas Association understands it, it is important for the continued formulation of the Norwegian regulations that it harmonizes with international regulations in this area, and especially EU`s regulations. It is unfortunate with special Norwegian reporting requirements in the CBCR amendment.” (Translated by PWYP Norway)
Read consultation response from Norwegian Oil and Gas Association:
(In Norwegian)
NHO points out that evaluations do not include changes in the CBCR amendment, and Norwegian regulations should extend no further, and questions the need for changes:
“NHO is however very concerned that Norwegian regulations on country-by-country reporting not extend further than the international requirements and corresponding regulations in countries it is natural to compare with, and that information which is not suited for disclosure should also not be made use of beyond its intended purpose (exchange between tax administrations).”
“Which is why we believe that questioning the need for changes must be done, and in addition we believe further changes in country-by-country regulations should be postponed until we see the effect of the changes that were made in 2017.” (Translated by PWYP Norway)
Read consultation response from NHO:
(In Norwegian)
Norsk Hydro points out in their consultation response that the evaluation does not comprise the latest changes to the CBCR amendment, and that these changes which were established in December 2016, mean significant additional requirements for reporting:
“What these changes mean to Hydro, which has limited activity within extracting, are significant additional requirements for reporting. This increased burden and complexity in reporting requirements should be included in the evaluation. Of Hydro`s 230 legal units there are only two which come directly under the target of the country-by-country amendment. Nevertheless all 230 companies are required to provide extensive information – information that would not have been necessary to gather and publish if Hydro did not have daughter subsidiaries within the extracting industry.” (Translated by PWYP Norway)
Read consultation response from Norsk Hydro:
(In Norwegian)
PWYP Norway asks the Ministry of Finance to not ignore that almost 80% of the consultation responses want more transparency!
PWYP Norway encourages the Ministry of Finance to make the reporting duty according to §4, paragraph 3 independent of the materiality limit in §4, paragraph 2. If it is desirable to get more companies to report in accordance with extended country-by-country regulations, then make universally valid the amendment for all companies over the materiality limit and let the extracting industries and forest-companies only report one extra figure beyond what all others are required to: production. This solves both making unwanted tax adjustments visible and makes sure that there is only one set of regulations to adhere to.
In this way the Ministry of Finance can implement CBCR legislation which adheres to Parliament's petition resolution from 2015.