A coalition of 33 European civil society organizations, Global Policy Forum among them, recently submitted a critical contribution to the ‘European Commission's consultation regarding the potential economic consequences of country-by-country reporting’ (CbCR) under the so-called Capital Requirements Directive IV. The purpose of the consultation is to collect information and obtain input from all interested stakeholders on the potential economic consequences of public disclosure by banks and investment firms of CbCR information. It aims to highlight in particular the effects of CbCR on competitiveness, investment and credit availability, and the stability of the financial system. Overall, the coalition argues that CbCR will have a positive impact on the economy, though they maintain that improvements should still be made.
September 16, 2014 | Global Policy Forum
Civil Society Organizations argue for enhanced Country by Country Reporting rules
On September 12, 2014 a coalition of 33 European civil society organizations, Global Policy Forum among them, submitted a critical contribution to the ‘European Commission's consultation regarding the potential economic consequences of country-by-country reporting’ (CbCR) under Directive 2013/36/EU (Capital Requirements Directive IV). Article 89 of that directive demands by January 1, 2015 the public disclosure by banks and investment firms, on a country-by-country basis, of the following information related to their businesses: name(s), nature of activities and geographical location; number of employees on a full-time equivalent basis; turnover; profit and loss before tax; tax on profit and loss; and any public subsidies received.
Overall, the coalition argues that the particular provisions of CbCR as part of the larger CRD framework will have a positive impact on the economy. However, in order for CbCR to be most effective, more information should be made publically available, including information about wages and other employee benefits, balance sheet totals, and assets under management. In addition, all of this information should be published on an ‘entity by entity level’ (rather than addressing only a few elements of the CbCR requirement or each element thereof in turn) in order to provide the full picture needed to identify cases of tax avoidance and evasion.
The signatory organisations believe that an enhanced CbCR requirement will have wide economic and fiscal benefits for Europe; however maintain that this will only be achieved if there is sufficient political will and public pressure is brought to bear on lawmakers to close tax code loopholes. Moreover, the CbCR rules would not only promote greater system-wide financial stability, but could also allow the European banking sector to gain a competitive advantage in being able to attract investors and clients who value transparency, and the certainty and predictability that flows from it. Finally, the increased transparency fostered by CbCR would help dissolve some of the root causes of the financial crisis, particularly the lack of clarity (and high levels of confidentiality) around financial institutions’ exposure to risk.
It is important to note that this consultation is taking place amidst ongoing and evolving discussions around CbCR following the launch of the OECD’s Action Plan on Base Erosion and Profit Sharing in 2013. The Commission’s report on the results of the consultation should be presented to the European Parliament and the Council by December 31, 2014.
See the full contribution by CSOs here.
