EU Planning to Consider Country-by-country Financial Reporting
The European Commission has decided to start a consultation on financial reporting that multinational companies have to make. The Commission is planning to have rules and standards for financial reporting on a country-to-country basis.
The move by the Commission is expected to pave the way for a new set of rules for multinational companies. It may require them to disclose financial information on their business operations in third world countries. They may have to make these disclosures in their annual financial statements.
The move by the European Commission has been welcomed by the Christian Aid charity as “hugely exciting”.
The Christian Aid charity has been fighting for country wise reporting of company’s financial statements because according to it, dodging of tax by businesses is a substantial problem that needs to be checked as soon as possible. It is also of the opinion that tax dodging is more of a problem in case of developing countries and it currently costs more than what they receive as aid.
Christian Aid has put a figure on what may be the actual cost of tax dodging for developing countries as $160 billion (£101 billion).
Dr David McNair, who is the Senior Economic Justice Adviser at Christian Aid, said in a statement that if the Commission does bring about the new rules, “then poorer countries will at last have more of the information they need to crack down on the unscrupulous multinationals which hide their profits in order to lower their tax bills.”
McNair further added that at present businesses shift a lot of their revenues to tax havens. They are also known to exaggerate on costs they have incurred while running their businesses in third world countries to dodge tax.
The consultation of the EU is open till December 21, 2010.