Written evidence submitted by Actionaid
The hearing announcement indicates that, "the
Committee will also be seeking information on any recent developments
in audit and accounting, with a particular emphasis on regulation
and the future role of auditors in banks and other financial institutions."
ActionAid would like to draw the committee's
attention to a recent development in international accounting
standards regarding which the Committee may wish to seek the witnesses'
opinions. This is the development of a country-by-country financial
reporting standard, which now looks increasingly likely in two
The OECD and the UK's Financial Secretary
to the Treasury, Stephen Timms, have indicated that an internationally
agreed best practice standard for country-by-country financial
reporting should be developed, as part of an update of the OECD's
Guidelines for Multinational Enterprises.
This follows a meeting on 27 January of the OECD's Committee on
Fiscal Affairs and Development Assistance Committee.
The International Accounting Standards
Board is this month expected to publish a discussion paper on
a new financial reporting standard for extractive industries (IFRS6)
which will include consideration of a country-by-country reporting
1. How will the development of a voluntary standard
at the OECD be bedded down into industry practice, given that
the latter is based on mandatory IFRS rules?
2. What steps is the accounting profession taking
to support the development of a country-by-country reporting standard?
At the beginning of last year, ActionAid estimated
that Africa alone would lose some US$49 billion of external revenue
as a result of the financial crisis and recession, including falls
in overseas aid, export earnings, remittances, foreign direct
investment and other sources of external income. The crisis has
shown the fragility of a development strategy based only on finance
from overseas, and demonstrated the importance of developing countries
strengthening their domestic sources of revenue.
Rather than acting to facilitate stronger domestic
financing for development, the current system helps those who
seek to avoid their financial obligations in developing countries.
Developing countries lose valuable revenue through tax evasion
and avoidance which is frequently channelled through tax havens.
The government estimates that developing countries lose between
$50 billion and $280 billion through tax avoidance and evasion.
The first step in the fight against the global
pandemic of tax evasion is to lift the veil of secrecy over corporate
tax payments. Currently multinational companies arebroadly
speakingonly required to report their financial results
on an aggregated basis. Introducing a requirement to break this
information down on a country-by-country basis would: give tax
inspectorates in developing countries more information on which
to prioritise their investigation of potential instances of MNC
tax evasion; give governments, media and civil society the information
they need to map and understand the patterns of capital flight
due to tax avoidance and evasion; have a strong preventative effect
on MNC profit-shifting.
1 The Financial Secretary's speech to the OECD meeting
can be read here: http://www.hm-treasury.gov.uk/speech_fst_270110.htm Back
OECD brings country-by-country tax reporting a step closer, The
Guardian, 28 January. http://www.guardian.co.uk/business/2010/jan/28/oecd-country-by-country-reporting Back