Consultation on CBCR requirement in the Norwegian Accounting Act
November 30, 2017
Consultation on country-by-country reporting requirement in the Norwegian Accounting Act
Global Financial Integrity is a Washington, DC-based research and advisory organization that has promoted transparency in the global financial system – including support for country-by-country financial reporting by multinational corporations – for over ten years. Given our experience in this area we would like to provide the following comments on language contained in Article 4, paragraph 2 of the Norwegian Accounting Act and its adverse impact on the intent of the CBCR requirements.
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.
Making this change would be in line with the Parliament’s original intent. Indeed, in June 2015, in connection with the Meld. St. 2 (2014-2015), jf. Innst. 360 S (2014-2015), the Parliament requested that “the government review the effect of the amendment for CBCR reporting as measured against Parliament´s goal to expose unwanted tax adjustments, and to make sure that relevant information related to the CBC reporting from subsidiaries and support functions in third countries appears in the financial accounts” (emphasis added).
The Norwegian government has shown significant leadership in the effort to create international norms aimed at increasing financial transparency. It is hoped that the current loophole can be addressed so that Norway, in keeping with its admirable global reputation in this area, will provide the simplicity and clarity needed to address financial opacity and corporate profit shifting.
Raymond W. Baker, President