Opinion piece: Should report on mailbox empires

Statoil and others should be forced to report on their mailbox empires. Or does the State prefer to get this sort of information through the news?

This opinion piece is written by Mona Thowsen, Secretary General in PWYP Norway. It was first published in DN (Dagens Næringsliv) September 13, 2017.

On July 24, Dagens Næringsliv revealed that Statoil has created a number of mailbox companies in the Netherlands in order to channel tens of billions of NOK through the Netherlands from other countries, resulting in taxes being circumvented.

Tax avoidance in practice is damaging, because countries lose tax revenues which should be financing common goods. IMF´s director Christine Lagarde and others have described such practices as a “race to the bottom”.

Statoil's tax director Finn Lexov stated that the company chose the Netherlands because of the favorable tax regulations. The oil industry is calling it “stable and predictable frameworks.”

Why don´t Statoil´s mailbox companies in the Netherlands appear in the country-by-country report?

The amendment concerning country-by-country reporting (CBCR) according to the accounting law article 3, is currently framed so that relevant information concerning subsidiaries and support functions such as Statoil´s mailbox companies in “third countries” are not apparent.  

The problem is that even if article 5, section 3, states that such additional information must be declared to include relevant information concerning where subsidiaries belong, and that this must happen “regardless of payment to authorities”, it is article 4, section 3, which commands on what premises such information must be given. This means that if Statoil themselves wish to declare such information, they can, but they are not compelled to.

We can see the result: Third countries´ share in the tax adjustment remains invisible. Statoil´s mailbox companies in the Netherlands are not reported. The wording “independent of payment to authorities” should therefore also be used in article 4.

A prerequisite for handling tax avoidance is the ability to discover that it is happening. At PWYP Norway, we have demonstrated that a few words can change the article, so that Statoil´s mailbox companies appear in Statoil´s own reporting. 

If it turns out that enormous capital is built up in a tax haven while little goes to Norway, or to poor countries, there is reason to question how the company operates.

Does this mean anything for Norwegian tax revenues? No, not directly in the short term. Yes, indirectly in the long term.

No, because the purpose with the mentioned tax change is that activities which do not occur in parts of Norwegian sea where oil is extracted, should not be added to deductions in Norwegian taxation. This in itself does not directly affect Norwegian tax receipts in the short term.

Yes, because the change in taxes is important concerning how much taxes Statoil pays outside of Norway. Indirectly and in the long term, this affects Norway and the tax level in Norway. A lack of tax receipts can also lead to increased payments from donor countries, such as Norway.

The price we pay, is greater than the billions that are drained out of countries. The price we pay when anyone is allowed to build up financial muscles in tax havens, outside the open market, is that money is converted into power. Companies pay lobbyists to counteract the establishment of rules and dilute regulations which would ensure transparency and democratic participation. Special interests are protected at the expense of the common interests.

It has been proven next to impossible to adopt national and international regulations that work. The price we pay is that citizens lose confidence in their politicians´will to make realistic changes so that the tax system is fair, and in democracy as a form of government. 

The State is the largest proprietor in Statoil with a stake of 67 percent. Is it the State itself that wishes tax havens remain invisible, or is it Statoil? Statoil cannot by itself be blamed for reporting according to an insufficient amendment. The company is just doing the same as other companies. Either way it is the wrong direction to go. Both Statoil, and the State, become complicit in the “race to the bottom.”  

When Statoil, and the State, avoid paying taxes to poor developing countries, these countries do not receive necessary tax revenues. Poverty is reproduced when people lose access to basic needs - education and work. Desperation and exclusion is created.

We have three choices:

Regular workers can foot the bill for all of welfare society.

We can accept decreased offer and quality in welfare services in the future.

Or we can implement regulations that give equal treatment to taxpayers and ensure that everybody pays taxes and contribute to society. For that to happen, a few words must be changed in the CBCR amendment, so that we can see profits that are channeled to third countries, and where the mailbox-companies are located.

Read more: The tax havens are now completely protected. The Ministry of Finance should be asked why.​