British Prime Minister David Cameron plans to push G8 leaders into creating a registry of the beneficial owners of all companies as a way of combating corruption and tax evasion.
“What we hope the G8 is going to sign up to is action plans on beneficial ownership. So every country has to produce its action plan,” Mr. Cameron told a conference on Saturday of more than 200 government leaders, business people and representatives from non-profit groups. These registries will be “the first port of call [for tax authorities] to try and uncover corrupt payments or tax evasion.”
Just before the conference began, Mr. Cameron announced that Britain is creating an ownership registry in conjunction with its offshore territories and crown dependents such as Bermuda, the Cayman Islands, the Turks and Caicos Islands, Jersey and Guernsey. Those dependents have also agreed to sign on to an international tax treaty to share information.
Many groups have argued that companies use shell entities or layers of ownership in offshore jurisdictions to pay bribes or evade taxes.
It’s not clear what kind of information will be included in the British registry or if it will be made public, something international development groups have called for. “We’re going to consult on whether it should be public,” Mr. Cameron said. “Personally I would hope the whole world will move towards public registers of beneficial ownership.”
The G8 meetings begin Monday at a resort in Northern Ireland and Mr. Cameron, who is chair, has put tax and transparency issues at the top of the agenda. It isn’t certain how far he will get with the registry proposal. Canada has been cool to the idea, fearing it will be too expensive and complicated, according to several non-profit groups who have been following discussions leading up to the G8.
“Now that the U.K. government has announced its aspirations to put beneficial ownership information in the public domain, the pressure is on other G8 countries to do the same,” said Rosie Sharpe, a campaigner at U.K.-based Global Witness. Ms. Sharpe said some studies have indicated that Canada is among the easiest countries in the world to set up an anonymous shell company.
Transparency dominated discussions at Saturday’s conference, which concentrated largely on Africa and how its rich resources are being developed largely by foreign multinational corporations. Several African leaders called on developed countries to create ownership registries and to help clamp down on tax evasion by requiring mining and oil companies to issue financial reports on a country-by-country basis.
“All these companies are registered offshore and don’t pay tax,” John Dramani Mahama, the President of Ghana, told the conference. For example, he said many African countries offer tax holidays to attract foreign investment, but some companies find ways around the law. “Companies come and set up and after five years they do a transfer of ownership and a new company takes it over and there’s another five-year holiday. That is all within the same family, registered somewhere we don’t know. And so there are all these tricks that are used that deprive the home country of the funds to put in the critical infrastructure that helps investors,” he said. “What do investors want? Do they want tax holidays or do they want proper infrastructure, enough power and things that will facilitate their business?”
Tanzanian President Jakaya Kikwete said many developing countries don’t have the tax or legal expertise to audit large companies and often rely on these businesses to essentially calculate their own taxes. As a result some go years without paying anything. He and others said the G8 should develop a pool of experts that these countries could draw on for help.
Still others, like Cesar Purisima, Minister of Finance in the Philippines, recommended the G8 develop a system of tax identification numbers for companies as a way of tracking businesses much like a financial passport.
Mining and energy companies are under increasing pressure to disclose payments to governments. The United States and the European Union have adopted rules requiring the reporting of these payments and Canada is about to follow suit. These reports have been seen as a way to uncover corruption and offer an insight into how much tax these companies are paying locally. But there have been concerns by some companies that different reporting regimes could conflict and that the process could become too administrative without offering any useful information.
The companies represented at the conference agreed on more transparency, and some, such as mining giant Rio Tinto Group, urged all companies to release country-by-country financial reports. However, Rio Tinto’s chief executive Sam Walsh told the conference he wants to ensure any new rules are applied consistently around the world. “It’s all about fair taxes and consistency,” he said.
William Morris, who heads global tax policy at General Electric, said he also supported greater transparency but he was not a “fan of country by country reporting.” Mr. Morris said the reports could be confusing and meaningless. That drew some sharp criticism from Pamela Chisanga, director of Action AIDS Zambia, who said the reports are vital in helping governments collect taxes owed.
“I work with children and women who on a daily basis have to go hungry because our government does not have adequate resources,” she told Mr. Morris. “Things like country-by-country reporting are important for countries like Zambia, so that needs to be adopted very quickly.”
For the most part there seemed to be general agreement at the conference among the national leaders, business executives and non-profit campaigners about the need to improve transparency and ensure companies pay a fair share of tax in developing countries. But there were some signs of tension.
When Shell’s chief financial officer Simon Henry outlined all the taxes the company had paid in Nigeria, the country’s finance minister, Ngozi Okonjo-Iweala, snapped: “You could do more.”