Norwegian municipalities should do as Sør-Varanger does

Facsimile from iFinnmark. Photo: Private.

This opinion piece was written by PWYP Norway´s Secretary General Mona Thowsen and was first published in the newspaper iFinnmark  on June 20, 2020.

Norwegian municipalities trade for billions of Norwegian kroner (NOK) annually.  But tax money can easily end up in tax havens if the municipalities don`t have adequate knowledge about the providers.

Sør-Varanger is the first municipality in Norway that has adopted “extended country-by-country reporting” as a public procurement criterion for large purchases and competitive tendering of services.  This shows that Sør-Varanger has understood how creative tax evasions take place and knows which tools municipalities and county municipalities can utilize to prevent such evasions.  

Read more: Ønsker å bli landets første skatteparadisfrie kommune: – Åpenhet er viktig for oss (Wishes to be the country`s first tax haven-free municipality – Transparency is important to us)

The resolution shows that Sør-Varanger municipality sees the importance of working to protect their citizens` tax base.  This is a natural development considering a string of scandals where municipalities have not had adequate knowledge about suppliers and where the money has gone.  Suppliers that continue to be tied to Sør-Varanger municipality are now required to be transparent about ownership and accounting so that any connection to tax havens can be revealed.

In tender competitions, contracts, and in general purchasing rules, Sør-Varanger municipality currently requires “extended country-by-country reporting” from the providers when the contract value and/or the collective annual municipal purchase from a single provider exceeds 1.300.000 NOK.

An information requirement, not an exclusion requirement

The resolution means that companies that want contracts with Sør-Varanger municipality must provide key information that makes transparent their company structure, including tax havens.

Sør-Varanger municipality creates, with this resolution, equal conditions of competition for all business activities, regardless of whether they be Norwegian or international.  Many companies in Norway and other countries currently have both an information disadvantage and a tax disadvantage in competing against multinational companies that easily can shift their profits around.

The requirement of extended country-by-country reporting will create equal conditions of competition by requiring the same information to be provided by the multinational companies as from the Norwegian companies.

Which is why the transparency requirement is not a basis for excluding companies.  That violates the EØS law.  The transparency requirement on the contrary is an information requirement.  This is information the municipality wants.

An example to follow

Sør-Varanger municipality has set an example to be followed by other municipalities.  At the same time, Sør-Varanger is a smaller municipality which normally generates a limited volume of procurements and greater transparency.  Because of this we hope and pray that this will not lead to any great revelations.  The effect of the resolution will increase the more municipalities start using it, especially when the large city municipalities join in. 

All municipalities should consider such a measure to avoid contracts being made without adequate knowledge about the bidders.

The tax havens

Evasion of taxation occurs by utilizing so-called “third countries” or “countries of support”, what we call “tax havens” in everyday language.  Tax havens are jurisdictions that hold the business idea of selling secrecy in exchange for “fees”.  This is a set of rules that only concern companies or people from other jurisdictions, not their own citizens.  In this way, the sale of secrecy undermines other countries` tax base.  Some tax havens try to give the impression of “international legitimacy”.  But it is difficult or impossible to know “what is what” and “who controls what” since the information is hidden in layers of secrecy.  Black money from narcotics trade, corruption, and all kinds of criminality can be white-washed and laundered into the open economy.  There is no reason to be naïve when facing what is factually facilitated in the tax havens.  Official policy in Norway, in EU, in OECD and in the UN is to reduce the loss of tax revenues.

Make the UN`s sustainability goals relevant locally

Several of the UN`s sustainability goals emphasize the meaning of taxes and capital flight in order to promote sustainable development.  Sør-Varanger municipality has by way of the resolution on extended country-by-country reporting made several of the UN`s sustainability goals relevant locally.  There are few sustainability goals that can be implemented without financing through the tax revenue.

PWYP Norway congratulates Sør-Varanger municipality with the resolution on June 10, 2020.