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On behalf of Publish What You Pay Norway,-
-I’d like to welcome you today to the launch of three publications.
It is not easy to get people interested in macro-economic issues.
At the same time, this issue involves such huge sums.
A thousand billion, ten times more than all aid combined.
Words to describe the enormity of the sums that are moved illegally-
-from poor countries to tax havens and secret accounts every year.
We have to show solidarity with the poor,-
-and make sure Norway does not accept the exploitation of poor countries-
-or their leaders increasing their own wealth-
-while up to 90 % of the citizens suffer in poverty.
The best aid Norway can give is to enable developing countries-
-and their citizens to follow the money.
Norway and Norwegian companies are also exposed to the same issues.
Have greed, irresponsible practices and secrecy-
-defeated concern for society and community?
This concerns the tax base that should build strong societies-
-for people in both the South and North.
It is the Norwegian welfare model, the Norwegian labour model-
-and Norwegian industry that are at stake.
If it is the most secretive companies,-
-with the largest investment in tax havens,-
-and who are the greatest drain on natural resources and tax bases,-
-if those companies win, then Norway will lose.
In the conservative USA, a law has been introduced-
-regarding transparency of payments to governments.
The EU has put forward a similar proposal.
However, many in the EU Parliament and in Norwegian civil society-
-see that this is not enough.
This is a minimum standard. Companies must say what they pay.
Often the simplest questions are the most difficult.
And perhaps that is why none of the opponents of this proposal,-
-could come today.
It may be that they find their counter-arguments very weak.
Or perhaps they suffer from a bad conscience.
The main reason that civil society in the South and North-
-has come together around this campaign,-
-is that 2/3 of the world's poor live in resource-rich countries.
Extraction of natural resources has not resulted in an economic base-
-that could help create opportunities to get out of poverty.
PWYP has formulated demands for transparency of revenue streams.
Something must have gone wrong.
The organisations behind PWYP demand that the extractive companies-
-provide financial information-
-for each country in which they are registered.
Citizens, investors and authorities in resource-rich countries-
-have little or no access to companies' financial activities,-
-or to check whether countries receive their rightful revenue.
The amounts are enormous. Aid will never attain such heights.
And that would not be desirable, since aid is not an end in itself.
However, good societies that can stand on their own; that is a goal.
It is of course more problematic-
-when the domestic authorities are involved in corruption.
Citizens dealing with corrupt leaders need another form of aid.
They need assistance to stop the flow of money-
-that maintains that leadership.
In Africa, oil exports amounted to nine times the value-
-of international aid in 2008.
The problem is that the profits often end up somewhere else.
For every dollar invested in developing countries,-
-we take 10 dollars back.
There is a sort of drainage system.
At the same time, many developed countries find-
-that the tax base disappears as an ever-increasing share-
-of the extractive industry’s revenue from developing countries-
-is channelled through tax havens, and from there into new investments-
-without much benefit to the home countries.
For countries wanting open and democratic societies,-
-one challenge is that global financial integration-
-has developed faster than national governments´ ability to regulate.
How can we be sure that the right interests are safeguarded?
And shouldn’t accounting rules also safeguard society’s interests?
Also, companies may utilise what is often referred to as tax havens.
They offer legal structures specially designed to conceal information-
-about activities and ownerships relating to other states.
The term is misleading because it suggests-
-that some countries have advantages when it comes to tax levels.
This is not an exercise of sovereignty,-
-it is a matter of intervening in other countries´ sovereignty.
PWYP Norway has published a report called "Piping Profits".
It reveals that ten of the world's most powerful oil and gas companies-
-utilize a total of at least 6,038 subsidiaries,-
-1/3 of which are incorporated in secrecy jurisdictions.
Trade in crude oil is an important aspect of the extractive industries.
Over 110 billion US dollars-
-seems to have disappeared due to over- and under-pricing-
-of crude oil imports in the EU and US, between 2000 and 2010.
Transfer pricing is often used by the extractive companies-
-to transfer profits from the source country to the company itself.
Companies often use lawyers to structure their transactions.
They make use of legal privilege so they do not have to disclose-
-what type of transactions they have accommodated.
You don't have to tie the trade of non-renewable natural resources-
-to the physical and geographical extraction of oil or minerals.
By using financial instruments, companies can move profits,-
-like derivatives, for example.
We have therefore taken a closer look at derivatives abuse,-
-and we introduce a report called-
-"Protection against derivatives abuse".
In this report, we try to shed light on the harmful use of derivatives-
-in the extractive industries.
Derivatives represent perhaps the most complicated-
-financial instrument available.
The industry may misuse derivatives to move capital across borders,-
-to their own advantage and at the expense of the host countries.
Today the risk largely falls on investors and the authorities.
The risk is not borne by the actual companies taking the risk.
The third report we are launching today-
-is called "Expanded country-by-country reporting".
PWYP Norway proposes a simple and efficient reporting mechanism.
This is a reporting standard that is completely in line-
-with how extractive companies consolidate their accounts.
The proposal will not of course solve all the problems and issues,-
-but it is a first step in trying to obtain a type of information-
-that makes it possible to ask important questions.
The robustness of country-by-country reporting-
-lies in the control of the amount of raw materials extracted-
-and information on the jurisdictions in which companies are registered.
Country-by-country reporting will produce high-quality data,-
-that is comparable for companies that operate in several countries.
The reporting requirement introduced in the US and proposed in the EU-
-is suitable for exposing corruption in the source country.
The EU proposal does not set a limit-
-upon how open and democratic companies should be.
The EU has simply proposed a minimum standard.
It is both possible and desirable-
-for Norway to go beyond the minimum standard.
Thank you, Publish What You Pay, for this invitation.
You have tabled a topic that is very important globally,-
-especially for developing countries.
The work you do supports recognition of an issue-
-that is increasingly important in our development policy.
In light of the white paper, "Climate, conflict and capital"-
-Erik Solheim has increasingly emphasized-
-that we need more than aid to obtain the just world that we want.
Capital flight out of poor countries is 10 times more than incoming aid.
That is a huge amount!
What would happen if we could do something,-
-a little bit, about financial flows leaking out of developing countries,-
-and make the money stay there to be taxed properly?
What would that signify compared with Norwegian aid?
We call this type of thinking ”beyond aid”.
What do we do when the aid ends? Aid is not a goal in itself.
Mobilization of developing countries´ own resources is the central element.
So the global financial system is marked by a lack of transparency.
This is a very big problem.
Tax havens, nominee companies and secrecy in the finance industries,-
-makes it possible for dictators and criminals to hide money,-
-money derived from corruption, crime and commercial tax avoidance.
This not only contributes to a skewed distribution,-
-but also to an unstable world.
It is dangerous.
Financial transparency is important in itself,-
-but also a means to strengthen democracy,-
-create opportunities to distribute society's resources more equitably,-
-and thereby create good and stable societies.
Unequal distribution is one of the greatest threats to stability.
On behalf of the civil service in the Ministry of Foreign Affairs,-
-we look forward to continued collaboration around this issue.
What are the benefits of country-by-country reporting?
Investors have a great deal to gain.
The capital markets will also have a lot to gain from this proposal.
It can significantly increase confidence in capital markets.
The good companies, those who do not abuse the mechanisms,-
-will find that this proposal will improve their situation a bit.
They won't be exposed to unhealthy competition to the same extent.
And all the source countries-
-will find that their situation is improved by this proposal.
Who will not benefit much from this proposal?
Those companies that actually exploit the systems to their benefit.
And the corrupt regimes-
-that allow more money to escape the country,-
-more than is necessary.
And that's why this is a problem,-
-not just for the resource-rich countries.
The way the extractive industries organize themselves,-
-has resulted in many of them, to a serious degree,-
-beginning to utilize tax havens.
What happens then, is that they use these companies-
-to divert capital-
-in order to set up new companies in the next country.
And then they remove a huge amount of profit-
-out of the resource-rich countries through many mechanisms,-
-and so this spiral continues.
What happens is that these cash flows to a large extent-
-become locked up in tax havens,-
-and only part of the cash flow goes to the home country-
-and to pay dividends to the investors.
And this means that the investors-
-see very stable dividends from these companies.
It does not vary according to prices,-
-nor to which mines or fields are in production.
This is a capital flow-
-that is planned from beginning to end,-
-to satisfy investors-
-in the way they believe investors would like.
But this means that there are pretty large cash flows
permanently locked away at the level of tax havens or below.
And consequently, investors do not have access to this capital-
-to invest it the way they would prefer.
This means that the companies, through the use of tax havens,-
-partially lock away the capital within the company itself,-
-and also keep it out of the home country.
When there is a divestment, and this is reinvested from the tax havens,-
-it means that more and more of the financial flows-
-are stored in tax havens,-
-and gradually, what used to be an open economy in the West-
-is moved to tax havens.
And this causes part of the capital to be choked in these markets.
I have used examples from audits I have been involved in,-
-where I have seen companies that have been able to remove-
-more than 10 % of their gross income.
One company was able to remove more than 20% of its gross income-
-from a natural resource-rich country.
So what's the problem?
The investors, the natural resource-rich countries-
-and the home countries of these companies, are in the same boat.
A growing share of the cash flow occurs internally to the company.
Mona said that 60 % of transactions take place within these companies.
And this is stored in various tax havens-
-and reinvested. I am referring to the deviating cash flow,-
-which then is re-used by the company without the investors having access.
Around 20 years ago, tax havens constituted a small part-
-of the multinational companies' portfolio.
Now, however, tax havens increasingly account for-
-more and more of these companies´ portfolios.
This means that large amounts come to be stored in these countries.
Taxes in resource-rich countries and in home countries are minimized.
Thus countries that give companies access to natural resources-
-are weakened.
In addition, free market places for capital markets etc.,-
-are weakened in this regard.
Financial markets, however, have mechanisms to get around this.
A lot of cash flow movement-
-is generated simply because a lot of the capital is located-
-in parts of the global economy where it should not have been.
So they have to come up with many strange mechanisms to release it.
As mentioned earlier, the investors receive less dividends,-
-as little as the companies believe investors will be satisfied with,-
-while still keeping them competitive in the market place-
-when it comes to acquiring new capital when needed.
So what is it we are asking for?
Well, the Dodd-Frank legislation in the United States-
-concerns tax payments,-
-and the EU is now tabling the same proposal.
Tax payments is a meaningless term in the world context.
How big are the tax payments in tax havens?
Zero.
Reporting of tax payments offers absolutely zero insight-
-into the magnitude of the cash flows passing through tax havens.
So, the current proposals-
aren't even minimum proposals. They are below the minimum.
Companies will still be able to keep much of their cash flow hidden.
Publish What You Pay Norway suggests-
-that tax payments be put into a meaningful context,-
-and the only meaningful context for tax payments-
-is to get insight into the revenues generated in a country,-
-the costs incurred in a country,-
-which enables you to say something about the profits.
And then you can look into what has been paid to the country.
Then you need insight into production volumes-
-to know what amount of resources has been extracted-
-and thus have something to link the income to.
Then you need to know how much was invested in the country,-
-in order to know what kind of return that represents.
Only then will we have a meaningful context for tax payments.
Where do we find this information?
Income and costs are already part of the companies´ consolidated accounts.
They are in the reporting packages for profit and loss accounts.
Can anyone truly believe that a company-
-can present a figure in its financial statements-
-of 14 billion dollars-
-without knowing which countries these 14 billion come from?
That does not hold water.
It's not as if, say, in "country X", one can have 1 billion,-
-or half a billion or 0.7 billion.
You have one specific figure. The accountant has audited that.
Taxes are also found in consolidation packages,-
-or in reporting packages connected to the home country's tax returns,-
-where you add up tax credits to avoid double taxation.
Again, can anyone believe that these figures do not exist-
-when a company has to set up its tax return in its home country?
Then the company would not be able to prove-
-that it actually had these tax credits available.
Production volumes. This is included in reporting packages,-
-in the notes, where production is summarized on a global basis.
Investments. Again, this is found in the reports.
This is the accumulated investment history,-
-and it is stated in the notes to the financial statement.
Again, for each country, this is one figure.
Firstly, is the information there? Yes, it's there.
No company can consolidate its accounts without these numbers.
Is information costly to obtain?
No, because we're only asking for electronic reporting-
-of numbers that are already available.
For many of the companies I know of,-
-I am quite sure that in setting up an online report,-
-you would spend maybe a couple of days setting up the report,-
-and after that it would be standardized year-on-year.
You would be able to generate it in a maximum of one day.
For companies with poor internal checks and poor reporting packages,-
-it may take up to three days, but not more.
If it does exceed that, then investors should ask themselves:
What kind of internal checks do these companies have,-
-if they can't produce the most basic information-
-from their accounts in a country-by-country report?
I would be sceptical as an investor.
Is the information sensitive? Not very. This is historical information.
It is certainly not sensitive if everyone reports it.
There would be a level playing field. Today the playing field is not level-
-as you rely on the information each company chooses to share.
That creates disparities.
Will companies do this voluntarily?
Some companies will do it. But guess who won't?
Is there a need to get this audited further?
No. This should be audited-
-as part of the audit of the consolidated accounts.
Auditors don't just look at figures in the consolidated accounts,-
-and say "good" or "bad".
They've seen the numbers for each country, it's a part of the audit.
My name is Morten Eriksen. I am senior public prosecutor in ØKOKRIM.
I have spent the last five or six years trying to understand-
-how multinational corporations function in the global market.
I think I have a good overview of the efforts made by the authorities.
We stand here today having to recognize-
-that it is civil society, through Publish What You Pay,-
-that is actually undertaking the great labour-
-for a better world in relation to this topic,-
-and not those organizations who should have been working on it.
Show transparency.
Companies operating on the Norwegian shelf or the Nigerian shelf,-
-or wherever, those who are engaged in mining,-
-show transparency or disappear from the countries where you operate.
There are some paradoxes that have puzzled me.
I can't understand why the extractive companies are given market access,-
-when they systematically practise secrecy towards the host countries.
This especially affects developing countries, but not only them.
It also concerns Norway.
Companies operating on the Norwegian shelf-
-retain the proper information from the Norwegian tax authorities.
And I cannot understand how this can continue year after year,-
-and why we believe that it has to be that way,-
-because that is not the case.
We can say: you will have market access,-
-but you will have to submit a transparency guarantee,-
-so that we're not wrestling with confidentiality issues in tax havens-
-or lawyers´ "legal privilege",-
-or other obstacles that keep all the world's authorities-
-from gaining necessary insight into multinational companies.
I'm not saying they are necessarily abusing their favourable position,-
-but there is certainly a risk of that,-
-and there is also overwhelming documentation of cases of abuse.
The transparency guarantee can be regulated through licensing terms,-
-regulated by law, or simply agreement based.
A voluntary guarantee of transparency on the companies´ side,-
-means that they should be open about those issues Frian mentioned:
Income, costs, taxes paid - the basis for calculating the tax.
We could have a guarantee established in law.
The law would state that companies who are granted permission-
-have to fulfil certain criteria-
-in terms of financial reporting or transparency.
A transparency guarantee represents a completely new way of thinking.
Secrecy should not be an inevitable obstacle-
-to poverty reduction,-
-something we have to accept when dealing with multinational companies.
Developing countries should exploit their bargaining power.
The large, new states such as China and India-
-will be huge competitors to Europe and the US,-
-when it comes to gaining access to raw materials.
Developing countries should use the bargaining power this gives them.
Unfortunately, not everyone in developing countries,-
-state leaders included, wants transparency,-
-because large-scale corruption requires opacity.
I'll come back to this.
We need to bring transparency in as a competitor to secrecy,-
-so secrecy is not the only parameter for competition in the market.
Getting that onto the map, making it part of Norwegian foreign policy,-
-to instil the idea that transparency-
-is a competitive alternative to secrecy, that is important.
It is harder to engage in large-scale corruption in an open landscape-
-than in the secrecy-based system we have today.
Even more importantly, we must reduce or eliminate-
-the influence of secrecy jurisdictions-
-and lawyers' confidentiality.
It should not be possible to hide behind it.
Furthermore, one can avoid costly and hopeless lawsuits-
-where developing countries have no chance.
Of course you can access information in a tax haven,-
-but only after a large number of legal disputes.
Particularly if these are financed by funds from developing countries,-
-in which case billions are available to pay for lawyers-
-who can stamp out any possibility-
-the developing country might have of accessing the information.
The authorities, with NORAD and the MFA at the helm,-
-should engage with state leaders willing to be open.
One has to offer competitive advantages-
-to those companies that promise transparency.
One has to mobilize state leaders, local opposition, etc. in the South,-
-to emphasize that we will prioritize those who are open,-
-not those entrenched in secrecy.
And I think we should make proposals for legislation-
-that would concretize the transparency guarantee.
And I also think that the Norwegian authorities-
-should assist companies who are willing to provide transparency-
-in competition with the secrecy businesses.
This was my simple solution.
I hope one day it will be brought into being.
Thank you for your attention.
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