Debate following the launch of PWYP Norway´s extended CBC policy proposal, Jan 19.

Uploaded by PublishWhatYouPay on 10.02.2012

We're lucky to have Siw Grindaker as moderator today.
She's a journalist, and is used to posing difficult questions.
I'd like to introduce the panelists.
Frian Aarsnes from Econ Pöyry.
Morten Eriksen from the economic crimes authority.
Fanny Voldnes, head of economics at the Fagforbundet labor union.
Joydhan Barua, senior tax advisor at the Norwegian Tax Administration.
And Leif Sande, director of the Industri Energi labor union. Welcome.
Some think that Norwegian companies are a bit better than others.
Is this correct, and should Norwegian authorities worry?
Well, we have tax evasion cases worth hundreds of millions.
Where the tax authorities have won.
So clearly transfer mispricing happens here too.
But we're avoiding the really big incidents-
-due to the systems set up by the Norwegian authorities.
Why is the Fagforbundet interested in accounting standards?
What's wrong with our current standards?
The Fagforbundet cares about international solidarity.
The Confederation of Trade Unions had a research project-
-where we among other things looked at the role of the accountants-
-in terms of the development of these accounting standards.
We've now listened to a lot about tax havens,-
-and how to... That tax havens exist.
But the fact that accounting standards make them possible,-
-that has not been highlighted.
The new international accounting standards, IFRS,-
-they increase the possibilities of extracting greater value.
This isn't well known.
But after the financial crisis it's fortunately become easier for us.
In fact, the full scope of the Enron scandal wouldn't have been possible-
-without these new accounting standards.
The reasons for this are among other things that...
There's agreement in the accounting profession-
-that these rules are full of subjective assessments-
-that enables extracting great value.
All these subjective assessments might be correct. That's the problem.
How can country-by-country reporting, like what PWYP Norway recommends,-
-have an impact on these accounting standards?
This really is about different interests.
Value is created in countries.
Natural resources are extracted or refined, and value is created.
This is about how this value is distributed.
The employees are an interest group.
It would be in the interest of all ordinary people and wage earners-
-that country-by-country reporting is instituted.
It's not in the interest of those who are not here today:
Those who represent the vested interests, and those who help them.
Some accountants and many lawyers claim-
-that this will inflict greatly increased costs to the companies.
What do you have to say to this?
We've heard that today's companies have large and comprehensive-
-information and accounting systems. They need this due to regulations.
They have to comply with directions from authorities.
And they have reporting requirements to their relevant stock exchanges.
So they need a sound accounting and information system.
And they also have a need for information themselves.
Those who run the companies need information-
-to help them with analysis and planning.
From what we can see, they have this information.
Including that which is required by Publish What You Pay.
The information might not be adjusted for this type of reporting.
But they have the basic information they need.
So I don't think this will make them incur heavy costs.
There might be some moderate expenses, though.
May I comment this? Frian Aarsnes summed this up nicely.
The companies are interested in this information themselves.
There's no need to worry, the companies have all this information.
Morten Eriksen, you recommend demanding transparency guarantees.
Why haven't people demanded transparency guarantees before?
Even though the extractive industries and the countries where they operate-
-need good relations and trust.
Why they don't demand all the information necessary to operate-
-in the resource-rich countries, this I can't explain.
It might be that when an applicant for a lisence comes,-
-or a big multinational, to work in the Norwegian offshore industry,-
-then you don't really question or demand much from the company,-
-beyond what's technically necessary-
-to run efficient and safe drilling operations.
To look into the company structure,-
-such as subsidiaries in tax havens, and how their funds are managed...
I don't think people even consider looking into these kinds of things.
I disagree with Frian, by the way.
I agree with him with regards to Norwegian companies.
Their capital tends to accumulate in Norway. Companies like Statoil.
But multinationals coming to Norway-
-probably don't behave better here then they do elsewhere.
Of course, we have better control systems than in a developing country.
Our government agencies are more solid-
-and keep a better watch.
We don't have the type of corruption that's hurting developing countries.
But I think the effect is the same.
The lack of oversight of big multinational corporations,-
-that's as real in Norway as in a developing country.
Norwegian authorities will never get the necessary information-
-to re-examine internal pricing in the companies.
Can we really demand a transparency guarantee from extractive companies?
Why shouldn't the Norwegian authorities make demands?
I believe the competition between the extractive companies will mean-
-that they'll adapt if transparency becomes a competitive advantage.
I really wish the EU would take part in this,-
-and institute a system for demanding transparency guarantees.
What does the rights of workers have to do with-
-a reporting standard for the extractive industries?
The labor movement has always cared about international solidarity.
Workers of the world united against the forces of capital, you know.
We often meet at international gatherings,-
-and we want people to build better societies.
But self interest also plays a part.
If we are to put pressure on our companies,-
-then others have to do the same.
So that those who embrace transparency don't lose out.
To create transparency is important to all of us.
And we have to unite to achieve it.
It's important to emphasize what's in society's interest.
Also with regards to this type of regulation.
Because of the deregulation that's taken place...
I'm thinking about accounting standards and corporate law.
I don't think there's any way around stricter regulations.
Country-by-country reporting seems very good.
It will be in the interest of all. Ordinary workers will gain by it.
And as Aarsnes said, the investors as well.
Since everything becomes clearer.
But the regulations must have legal force. We can't afford to be naive.
There are powerful forces involved, so legal changes are necessary.
A transparency guarantee is fine, but that would have to be supplementary.
Country-by-country reporting would make the boards responsible,-
-and they would be financially liable for the information they provide.
The accounting standards that they outsourced-
-to a private foundation... Fanny?
From 2002 a private foundation... I think it was 2002.
A private foundation has created the accounting standards in Norway.
Previously a publicly appointed committee handled it.
The private foundation is dominated by the accountants.
I'm a member. They're not happy that I'm telling you this.
The Ministry of Finance has the oversight,-
-but they don't work with accounting standards, they only file them.
What do you think of this structure? Is it problematic?
It's not easy to have an arrangement-
-where those who must follow the rules, get to make them themselves.
There's not much more to say about that.
But the ones who make the rules are the ones with the expertise.
There should be others there than representatives of the profession,-
-to offer contradictory views. But unfortunately that's not easy.
The accounting industry is privatized.
And when you need rules for accounting,-
-then the industry will carry great weight in a committee.
Let's turn to transfer pricing and developing countries.
How can country-by-country reporting, like PWYP Norway recommends,-
-have an impact on transfer pricing, which I know the NTA is working on?
That's right, it's one of our primary tasks.
60 % of the world trade takes place within companies, so it's important.
PWYP's suggestion might give us a wealth of information.
From this we can see how companies invest in different countries.
How many factor inputs they have available.
And their expenses and incomes in different countries.
From this it's possible for the tax authorities in all countries-
-to see the chain of value creation.
How much each subsidiary contributes-
-to the company's global value creation.
That's what's most important to us when working with internal pricing.
From this we can find the correct pricing,-
-whether the price they've paid is consistent with the market price.
Morten Eriksen, can we expect heads of state in developing countries,-
-based on their own interest, to demand transparency guarantees?
Wouldn't they want "opaqueness guarantees"?
Probably. But it's not certain that all heads of state see it like this.
One might mobilize the political opposition.
I think many people are sick and tired of corruption-
-and poor management of natural resources.
If we can "fire up" the right forces, then something can happen.
Transfer pricing is difficult to deal with, for three reasons.
1: The rules are too complicated.
2: The information needed for correct pricing isn't always available.
3: It's not easy for the tax authorities to match-
-the complicated cost picture you find in the extractive industries,-
-where production is specialized, and costs are constantly discussed.
In practice it's a hard struggle.
We have to give legal protection guarantees,-
-to aid the extractive industries in case of legal troubles.
On the topic of transparency: I've been to Timor Leste-
-to discuss taxation.
There's no-one my age there. Everyone is under 50 years of age.
They are idealists who are building a nation from scratch. They have oil.
And they care about transparency.
There are many governments who are not corrupt and want transparency.
We mustn't think that all governments are corrupt.
I've worked in the oil industry in Norway for 25 years now.
It hasn't always been clean and orderly here,-
-with regards to taxation and transparency.
It's better now, but I remember back in the day...
They bought parts from themselves in the US, at 20 times the market price-
-just to reduce their taxable income.
It's not like that now, but that's not because the companies are nicer.
It's the regulations that have improved.
And the tax system here in Norway is greatly improved.
That's the main reason.
It's a bit funny when you look at the tax system here in Norway.
Ten years back the oil industry was outraged by the tax system.
They made reports about the "government take".
Norway was ranked at the bottom. The rest of the world beat us.
If you ask the oil companies today why they're here in Norway,-
-you'll get one reply: Our tax system is so favorable. With a 78 % rate!
Nothing is more important than transparency,-
-because corruption is the greatest scourge of all.
If you don't collect taxes, then you can't build a welfare state.
And then you can't get the type of society we enjoy here.
Nothing is more important-
-than creating transparency and fighting corruption.
Fanny, please.
I believe that country-by-country reporting...
The transparency it provides is the most important thing-
-for those of us who wish to eliminate tax havens.
In addition to the corruption and illegality involved,-
-it's also important when it comes to the distribution of wealth.
Both internationally, based on solidarity with developing countries.
But also here in Norway.
This is currently limited to the extractive industries.
Oil, gas and minerals.
But why stop there?
In the Fagforbundet we have found that public funds...
100 % publicly funded kindergartens.
We've found that parts of these funds end up in tax havens.
-Nursing homes too, I've heard. -Yes.
This is a worsening problem-
-with other parts of the nation's wealth, not just natural resources.
So I would want this to be added.
What if we spent 10 % of the foreign aid budget-
-on measures to increase transparency?
Not just talking, but actually using funds.
To help make developing countries demand transparency.
Remember, what we're talking about here is...
Taxes are often regarded as just a pain in the back.
But when it comes to the extractive industries,-
-the developing countries are sitting on a gold mine.
They have the commodities. That gives them bargaining power.
That means that they can make demands.
But they need assistance so that it's done the right way.
I'm sure that if we made some changes to the foreign aid budget,-
-and spent serious money-
-where there are heads of state who will demand transparency guarantees,-
-we would accomplish a lot more than through the traditional way.