New US law on revenue transparency sets the right standards for companies
Transparency International advocates for next steps to tackle opaqueness
Transparency International (TI) welcomes the mandatory disclosure of payments to governments required of oil, gas and mining companies listed on the New York Stock Exchange, now mandated under landmark provisions in a US bill signed into law today.
The bill, a breakthrough for transparency and accountability, responds to TI’s 2008 calls for precisely this kind of legislation and represents a major victory for the Publish What You Pay Coalition, of which TI is a member. The new US legislation constitutes a major step forward, but Transparency International and other civil society organisations are already seeking further progress.
“Other countries with major financial centres should quickly follow suit and provide the citizens of resource-rich countries with information needed to ensure that the benefits of their natural wealth enable the advancement of their own societies,” said Huguette Labelle, Chair of Transparency International. Governments of resource-rich countries are ultimately accountable for the management of their natural wealth.
The significance of the Dodd-Frank financial reform bill is underlined by the fact that it covers many of the world’s largest extractive companies. Nonetheless, similar legislation is now essential for companies listed elsewhere. Following the adoption of new disclosure rules in Hong Kong in early June, the new US bill should considerably accelerate the process towards transparency in extractive revenues.
Most of the world’s poor live in resource-rich countries and although many constitutions grant citizens ultimate ownership of their country’s natural resources, much of the data on what companies pay for the right to exploit these resources and how this money is spent by host governments remains unpublished and beyond public scrutiny, as shown in a TI report.
Mandatory disclosure of payments made possible by this new bill will also help advance the Extractive Industries Transparency Initiative (EITI), which still needs to reconcile corporate disclosure of payments made with governmental disclosure of payments received, and is also working on countries in which several corporations are not listed in New York. EITI is an international coalition of governments, industry and civil society that promotes transparency in resource extraction revenue.
Non-listed, state-owned companies in the extractive industries are playing an increasingly important role in the oil and gas sector. Those corporations are crucial to national economic growth and are increasing their international relevance by expanding their business in several countries. Governments, as majority shareholders of those corporations, should make the leap towards transparent profits by publishing all payments made to them and to the foreign governments where these companies operate.
Corporate disclosure of taxes and royalties is crucial, but needs to be accompanied by corporate reporting of income on a country-per-country basis, so that citizens know what share of the value created is allocated to the public budget, and what share goes to the corporation.
While full disclosure of taxes, royalties and other payments to governments may reduce opportunities for corruption, it does not put an end to bribes. Corporations that are serious about corruption-free profits must implement sound anti-corruption programmes that address multiple areas such as the use of agents, subcontractors and business partners along with charitable sponsorships and political contributions, among others.
Transparency International is the civil society organisation leading the fight against corruption
Note to editors:
The 2008 Report on Revenue Transparency of Oil and Gas Companies evaluates 42 leading international and national oil and gas companies operating in 21 countries, based on the transparency of their reporting, particularly on payments made to governments for resource extraction rights. To download the report, click here.
TI’s next Promoting Revenue Transparency report will be published in spring 2011. The report reviews listed and non-listed corporations on disclosure of payments as well as income, and on their reported anti-corruption programmes.
For information on TI’s work on curbing corruption in the private sector, click here.
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