STOP

Fifty Shades of Tax Dodging • 17
The problem is even more pronounced for developing
countries, as the often relatively small size of their markets
means that they get lumped together with other countries or
even regions. For example, a citizen in any African country
will find it very difficult to get any meaningful information
from Coca Cola’s financial statements as the company
does not report on any individual African country. In fact it
does not even report separately on Africa as a continent,
preferring instead to lump it together with Eurasia in the
company’s financial reports. 108 This example is far from
unique and the fact that a company consolidates its accounts
is not as such an indicator of tax dodging, but simply makes it
impossible to see where companies are doing business and
where they pay taxes.
Public country by country reporting would greatly help
to counter the problem of consolidated reporting, as
multinational companies would have to provide a view of
their activities in each of the countries in which they operate.
Under an EU directive passed in 2013, banks will have to
report publicly on country by country information in 2015
for the first time (see Box 7). Such public reporting formats
support developing countries much better than the OECD’s
plans for confidential CBCR, since both citizens and tax
authorities in developing countries would be guaranteed
access to the data when it is in the public domain.
The European Commission is currently conducting an
impact assessment that will feed into its decision making on
whether to adopt public CBCR for all industries, not just the
banking sector. However, in the past there has been strong
resistance to public country by country reporting from
some Member States, which risks blocking progress for
developing countries. 109
If country by country reporting information is only filed
in the country where the multinational company is
headquartered, as the OECD BEPS initiative proposes, it is
unlikely to be shared widely – especially among developing
countries, which particularly need to see this information
(see section 3.1 – automatic exchange of information – for
the problems with developing countries’ participation in tax
information exchange).
€3.7 billion:
The turnover of McDonald’s subsidiary in Luxembourg
(2009–2013).
0:
Number of times the Luxembourg subsidiary is mentioned in
McDonald’s financial statements.
Box 7
Public country by country reporting in the EU:
Lessons from the financial sector
The EU Capital Requirements Directive IV 110 introduced
the obligation of making country by country reporting
public for banks based in the EU. In an analysis of the
data available for 26 EU-based banks, 111 chartered
accountant Richard Murphy finds that public data
makes it possible to conduct a rudimentary risk
analysis of possible profit shifting and base erosion by
the banks. Two important findings emerge from the
risk analysis.
First, shifting of profits in low-tax and offshore
jurisdictions seems to be happening 112 thus potentially
generating an erosion of other countries’ tax base; and
secondly, the main jurisdictions allowing this are – in
general – what he terms the ‘usual suspects’. The top
five jurisdictions where there are indications of overreporting
of profits are the US, Belgium, Luxembourg,
Ireland and Singapore. 113
The analysis of the newly published information
also shows how the published country by country
reporting helps shed light on what goes on in
developing countries. For example, back in 2012
Barclays published its accounts on a consolidated
basis thus making it impossible to know much about
its operations in developing countries. Nowadays, the
accounts that the bank publishes allows readers to
determine that, in 2014 – as two random examples – 30
employees generated a turnover of €744.36 million 114
in Luxembourg, where the company paid €4.9million 115
in taxes, whereas in Kenya 2,853 employees generated
a turnover of almost £200 million, and the company
paid only €37 million 116 in taxes. 117