Global tax dodging by multinational corporations fuels economic inequality and undermines investments in poverty-reducing social services. Tax transparency can help shine a light on whether companies are paying what they should. Oxfam encourages governments to require publication of companies’ country-by-country tax reports and for companies to disclose their profit and tax payments.
In a new report recently released, Shell went beyond its legal requirements for financial reporting and payments-to-governments reporting by mining, oil, and gas companies by including country-by-country profit, employment, and tax data covering all its business segments, accompanied by explanatory text. This sort of public country-by-country reporting and the additional narrative information are critical for investors, civil society, and the general public to assess whether a company is paying a fair amount of tax.
“Under pressure from civil society groups and investors who have questioned whether Shell pays a fair share of taxes in the countries in which it operates, Shell has responded by providing more transparency,” said Daniel Mulé, Oxfam America’s senior policy advisor for tax and the extractive industries. “These new disclosures provide the public with critical information to understand Shell’s approach to tax and evaluate whether the company takes its stated commitments to responsible tax principles seriously.”
The disclosures in Shell’s report are in line with the Organization for Economic Co-operation and Development (OECD) template that companies are already using to report this information to governments. Shell is now the first multinational corporation to disclose this country-by-country reporting. The company’s report covers operations across its various business segments in 99 countries that generated over $396 billion in revenues and led to profit tax payments of $10.1 billion in 2018.
“While some companies argue that publishing profits, employment, and taxes on a country-by-country basis is too difficult, Shell has now proved them wrong,” said Niko Lusiani, Oxfam America’s senior advisor for corporate advocacy. “This report demonstrates that this sort of reporting is possible, even for a large multinational company with a variety of different types of operations in a range of different countries and regions, does not present a competitiveness risk for companies, nor does it entail exorbitant and prohibitive administrative costs. Countries currently considering whether the existing system of confidential OECD country-by-country reports can be transformed into a public one can now see that this is feasible. Legislation requiring such disclosure should be passed to level the playing field and ensure companies can be held to account.”
“Companies preparing to comply with the Global Reporting Initiative’s new Standard for reporting on tax will find Shell’s new report a helpful practical reference for how country-by-country reporting can be done,” said Lusiani. “Most importantly, it shows that there is appetite from one of the largest listed companies in the oil and gas sector to embrace greater tax transparency beyond mandatory payments-to-governments disclosures as a means of improving public trust. But transparency alone is insufficient. Shell and other companies must also take action to ensure their tax practices are responsible and contribute substantially to the tax base of the countries in which they operate.”
Shell’s new report comes as the US Securities and Exchange Commission (SEC) plans to propose a rule today on Section 1504, a bipartisan anticorruption provision in the 2010 Dodd-Frank Act that requires all oil, gas, and mining companies listed on US stock exchanges to disclose the payments they make to governments for projects.
“The SEC should take note of the fact that Shell published the tax it paid in countries around the world in 2018,” said Mulé. “The oil, gas, and mining sectors are critical to the economies of resource-rich countries but too often they are shrouded in secrecy, plagued by corruption, or provide only limited benefits to citizens and public budgets. A strong payments-to-governments rule from the SEC, in line with the rules that Shell and other extractive industry companies in the European Union are required to comply with, can help combat these trends and bring much-needed transparency to the natural resources sector.”