Extractive industries and taxationNorwegian views and initiatives

New White Paper

Climate, Conflict and Capital

A globalised world with benefits unevenly distributed. Our policy will challenge the skewed balance of power in and between countries that contribute to inequity, oppression and discrimination – at all levels.

Not only what advances development, but also what deters it

Global public goods; climate, peace and stability, functioning markets

New White Paper contd.• Globalisation and capital – systemic issues – a more level

playing field – global public goods – tax, FDI, remittances more than ODA

Capital flows to developing countries, 2007

Sources: GFI 2009, World Bank 2008, UNCTAD 2008, OECD 2008

Illicit flows split up, GLOBAL CROSS-BORDER FLOWS OF GLOBAL DIRTY MONEY, RAYMOND BAKER, 2005

US$ Billion Global Developing and transitional

Low High Low High

1. Corrupt flows 30 50 20 40

2. Criminal flows 331 549 169 238

of which, Drugs 120 200 60 90

Counterfeit goods 80 120 45 60

Human Trafficking 12 15 10 12

Illegal Arms Trade 6 10 3 4

Smuggling 60 100 30 40

Racketeering 50 100 20 30

3. Commercial 700 1000 350 500

of which: Mispricing 200 250 100 150

Abusive transfer pricing 300 500 100 150

Fake transactions 200 250 150 200

Total 1,061 1,599 539 778

Commission proposals•National initiatives:

• Development policy should improve tax systems and transparency, work against corruption, and act coherently

• Consider new legislation related to company and individual reporting on use of tax havens. Set up a law commission to study registration requirements, including for advisors and facilitators

• Accounting – requiring Norw. multinational to report on equity interest, employment, gross income, tax paid etc.

• Transfer pricing – supplement arm’s length principle (comparable profits, formualry approach)

• Consider setting up a national centre of expertise

• International measures:

• A cross-ministry working group, networking and influencing

• New rules on the right to tax, domiciliation and ”warm bodies”

• An international convention on transparency in econmic activity

• OECD outreach program, capacity building and international cooperation

Commission proposals contd.

www.financialtaskforce.org

5 priorities of the Task Force1) Trade Mispricing - Require that the parties conducting a

sale of goods or services in a cross-border transaction sign a statement in the commercial invoice certifying that no trade mispricing in an attempt to avoid duties or taxes has taken place and that the transaction is priced using the OECD arms-length principle.

2) Country by Country Reporting - Require that all multi-national corporations report sales, profits, and taxes paid in all jurisdictions in their audited annual reports and tax returns.

3) Beneficial Ownership - Require that the beneficial ownership, control and accounts of companies, trusts and foundations be readily available on public record to facilitate effective due diligence.

4) Automatic Tax Information Exchange - Require governments to collect from financial institutions data on income, gains, and property paid to non-resident individuals, corporations, and trusts. Mandate that data collected automatically be provided to the governments where the non-resident entity is located.

5) Money Laundering - Require that predicate offenses for a money laundering charge are harmonized at the most restrictive level and codified.

See more at www.financialtaskforce.org

5 priorities of the Task Force, contd.

Other initiatives and support

• Oil for Development

• EITI

• Bilateral tax work; Zambia, Tanzania, expansion?

• UN Tax Experts and S4TP

• WB academic conference on illicit financial flows

• IMF TFs on natural resource taxation and anti-money laundering

• StAR Initiative

• International Tax Compact, International Tax Dialogue, OECD

Corporate social responsibility• Another White Paper last year; CSR in a globalised world• Make it good business to have good CSR policies• CSO and media vigilance and pressure important, need for access to

information, transparency• The Petroleum (Pension) Fund exercises influence through active

ownership and exclusion, based on ethical guidelines. Annual report to parliament

• Study made for MFA last year, 300 Norw. companies with +50 employees interviewed. Some results; many think it’s a question of “local” engagement, large companies more conscious, generally positive attitude, not much knowledge about international rules/guidelines, think Norwegian authorities should inform more and better.

• In relation to mining/oil; anti-corruption, transparency and taxes important

• Secrecy jurisdictions make it easy to avoid, not only paying taxes, but also taking responsibility for environmental standards and working conditions.