Country-By-Country Reporting (NO0052)

Background: Only a few relevant Norwegian companies are covered by the current regulations. 1. Start evaluating the Norwegian country-by-country regulations. 2. Investigate how relevant information related to country-by-country reporting from subsidiaries and support functions in third countries should be presented in the accounts. 3. Investigate how to establish supervision of entities with obligations to report according to the country-by-country regulations. Status quo or problem/issue to be addressed: The Norwegian Parliament adopted new rules in December 2013 on "country-by-country reporting" (LLR), as proposed by the Ministry of Finance, cf. Prop. 1 LS (2013-2014) Chap. 20. The proposition announced that the Ministry of Finance intends to evaluate the Norwegian country-by-country regulations after three years. In Resolution no. 792 ((2014-2015), the Norwegian parliament asked the government to review the effects of the regulation on LLR reporting, measured against the parliament's goal to highlight adverse tax planning and ensure that relevant information related to the country-by-country reporting from subsidiaries and support functions in third countries is presented in the accounts. Parliament also asked the government to investigate how to establish supervision of entities with obligations to report according to the country-by-country regulations. Main Objective: The primary purpose of the country-by-country regulations is to contribute to greater transparency about the activities of companies that extract non-renewable natural resources in order to provide the population in the various countries where such activities are conducted, the possibility to hold the authorities accountable for the public administration of revenues from the country's natural resources. A further objective of the regulations is to help draw attention to adverse tax planning. Brief Description of Commitment (140 character limit): The government believes that the evaluation of the LLR regulations should be based on LLR reports from at least two financial years, i.e. for the financial years 2014 and 2015, and it should be possible to complete no later than spring 2017. The government will also examine how relevant information related to LLR reporting from subsidiaries and support functions in third countries shall be presented in the accounts, as well as possible supervisory schemes, with the intention to present the necessary regulatory amendments during 2016. Relevance: Preparation of the LLR regulations could enhance transparency with respect to capital flows from companies operating in the extractive industries. Increased transparency could provide greater access to information that can help ensure that civil society will be increasingly able to hold the authorities to account for the administration of the country's natural resources in the country where the companies operate. Access to more information about the companies/corporations could also contribute to increased transparency, thereby highlighting any tax planning. Ambition: Norway wants to evaluate and improve its LLR regulations and to contribute its experiences to the EU in connection with the evaluation that the EU plans to conduct on its own legislation in 2017/2018.

8. Country-by-country reporting

Commitment Text:

Title: 8. Country-by-country reporting: Study how relevant information related to country-by-country reporting from subsidiaries and support functions in third countries should be presented in the accounts, as well as possible supervisory schemes.

Background: Only a few relevant Norwegian companies are covered by the current regulations. 1. Start evaluating the Norwegian country-by-country regulations. 2. Investigate how relevant information related to country-by-country reporting from subsidiaries and support functions in third countries should be presented in the accounts. 3. Investigate how to establish supervision of entities with obligations to report according to the country-by-country regulations.

Status quo or problem/issue to be addressed: The Norwegian Parliament adopted new rules in December 2013 on 'country-by-country reporting' (LLR), as proposed by the Ministry of Finance, cf. Prop. 1 LS (2013-2014) Chap. 20. The proposition announced that the Ministry of Finance intends to evaluate the Norwegian country-by-country regulations after three years. In Resolution no. 792 ((2014-2015), the Norwegian parliament asked the government to review the effects of the regulation on LLR reporting, measured against the parliament's goal to highlight adverse tax planning and ensure that relevant information related to the country-by-country reporting from subsidiaries and support functions in third countries is presented in the accounts. Parliament also asked the government to investigate how to establish supervision of entities with obligations to report according to the country-by-country regulations.

Main Objective: The primary purpose of the country-by-country regulations is to contribute to greater transparency about the activities of companies that extract non-renewable natural resources in order to provide the population in the various countries where such activities are conducted, the possibility to hold the authorities accountable for the public administration of revenues from the country's natural resources. A further objective of the regulations is to help draw attention to adverse tax planning.

Brief Description of Commitment: The government believes that the evaluation of the LLR regulations should be based on LLR reports from at least two financial years, i.e. for the financial years 2014 and 2015, and it should be possible to complete no later than spring 2017. The government will also examine how relevant information related to LLR reporting from subsidiaries and support functions in third countries shall be presented in the accounts, as well as possible supervisory schemes, with the intention to present the necessary regulatory amendments during 2016.

Relevance: Preparation of the LLR regulations could enhance transparency with respect to capital flows from companies operating in the extractive industries. Increased transparency could provide greater access to information that can help ensure that civil society will be increasingly able to hold the authorities to account for the administration of the country's natural resources in the country where the companies operate. Access to more information about the companies/corporations could also contribute to increased transparency, thereby highlighting any tax planning.

Ambition: Norway wants to evaluate and improve its LLR regulations and to contribute its experiences to the EU in connection with the evaluation that the EU plans to conduct on its own legislation in 2017/2018

Responsible institution: Ministry of Finance

Supporting institution(s): Pending evaluation in the Ministry

Start date: May 2015 End date: June 2017

Context and Objectives

Country-by-country reporting (CBCR) is a means to increase transparency vis-à-vis how extractive industries operate across the globe. CSOs and other stakeholders in Norway view this issue as critical, particularly due to the risk of tax avoidance. Because of the complexity of this issue, however, it does not get much attention.^{[Note: Telephone interview with Mona Thowsen, Publish What You Pay Norway, 30 November 2017.]} In 2013, the Norwegian Parliament (Storting) adopted the regulation on country-by-country reporting (CBCR). Since then, extractive industries have been required to publish CBCR data in their annual reports, indicating the flows of income, costs, taxes paid, and sign-on fees per country in which they operate.

In 2015, the Norwegian parliament decided that the government should review the effect of CBCR regulation. This commitment seeks to conduct a review of the effect of CBCR on alleviating adverse tax planning, and to consider how relevant information from subsidiaries and support functions in third countries can be included in CBCR.^{[Note: http://www.publishwhatyoupay.no/en/node/16781. ]} One of the objectives is to provide an account of what the ministry considers relevant CBCR information.

The commitment is relevant to the OGP value of access to information, since CBCR is a useful tool to access information about big Norwegian corporations with multinational operations. The specificity of this commitment is low, as the commitment language suggests aspirations for improving the existing regulation but does not necessarily commit to specific verifiable steps toward addressing the issue. Therefore, its potential impact is minor.

Completion

As of 2017, all Norwegian multinational enterprises with annual income above NOK 6,5 billion must provide CBCR for all countries in which they operate within 12 months after the end of the accounting year.^{[Note: See http://www.skatteetaten.no/en/business-and-organisation/reporting-and-industries/Internprising/cbc-reporting/. ]} Before this change, CBCR applied only to extractive companies.

According to stakeholders and CSOs, there are several major weaknesses in the current CBCR regulations. Publish What You Pay Norway (PWYP) holds that the current regulation protects tax havens, since CBCR is not required in cases where paid taxes are below NOK 800,000 per financial year, and CBCR is not part of the financial statement of companies.^{[Note: Telephone interview with Mona Thowsen, Publish What You Pay Norway, 30 November 2017. See also http://www.publishwhatyoupay.no/en/node/17147. ]} In its comment at the 2017 hearing on the CBCR evaluation, the Tax Justice Network (TJN) argued that the current CBCR regime does not include a sufficient number of companies, and that CBCR for extractive industries and CBCR for tax purposes ought to be harmonized.^{[Note: TJN’s comment and the other comments received are available at https://www.regjeringen.no/no/dokumenter/horing-av-evalueringsrapport-om-land-for-land-rapportering-regelverket/id2576639/.]}

Outside the assessment period of this report, the government began consultations on the evaluation of CBCR regulation during autumn 2017, with a deadline of 7 December 2017 for comments.^{[Note: See https://www.regjeringen.no/no/dokumenter/horing-av-evalueringsrapport-om-land-for-land-rapportering-regelverket/id2576639/, and}

https://www.regjeringen.no/contentassets/355189369a02429cb74ff85f09ac777a/evalueringsrapport-llr.pdf. ] According to the self-assessment report provided by the Ministry of Finance, the commitment has been carried out, and legislative amendments came into effect on 1 July 2017. With the consultation paper, the commitment appears to be on time.

Next Steps

Given the potential of CBCR to increase corporate accountability domestically as well as globally, it is recommended that the government continue working to enhance CBCR regulations. The IRM researcher recommends carrying forward this commitment to the next action plan, with more clarity on intended results.

8. Country-by-country reporting

Commitment Text:

Study how relevant information related to country-by-country reporting from subsidiaries and support functions in third countries should be presented in the accounts, as well as possible supervisory schemes.

Background: Only a few relevant Norwegian companies are covered by the current regulations. 1. Start evaluating the Norwegian country-by-country regulations. 2. Investigate how relevant information related to country-by-country reporting from subsidiaries and support functions in third countries should be presented in the accounts. 3. Investigate how to establish supervision of entities with obligations to report according to the country-by-country regulations.

Status quo or problem/issue to be addressed: The Norwegian Parliament adopted new rules in December 2013 on 'country-by-country reporting' (LLR), as proposed by the Ministry of Finance, cf. Prop. 1 LS (2013-2014) Chap. 20. The proposition announced that the Ministry of Finance intends to evaluate the Norwegian country-by-country regulations after three years. In Resolution no. 792 ((2014-2015), the Norwegian parliament asked the government to review the effects of the regulation on LLR reporting, measured against the parliament's goal to highlight adverse tax planning and ensure that relevant information related to the country-by-country reporting from subsidiaries and support functions in third countries is presented in the accounts. Parliament also asked the government to investigate how to establish supervision of entities with obligations to report according to the country-by-country regulations.

Main Objective: The primary purpose of the country-by-country regulations is to contribute to greater transparency about the activities of companies that extract non-renewable natural resources in order to provide the population in the various countries where such activities are conducted, the possibility to hold the authorities accountable for the public administration of revenues from the country's natural resources. A further objective of the regulations is to help draw attention to adverse tax planning.

Brief Description of Commitment: The government believes that the evaluation of the LLR regulations should be based on LLR reports from at least two financial years, i.e. for the financial years 2014 and 2015, and it should be possible to complete no later than spring 2017. The government will also examine how relevant information related to LLR reporting from subsidiaries and support functions in third countries shall be presented in the accounts, as well as possible supervisory schemes, with the intention to present the necessary regulatory amendments during 2016.

Relevance: Preparation of the LLR regulations could enhance transparency with respect to capital flows from companies operating in the extractive industries. Increased transparency could provide greater access to information that can help ensure that civil society will be increasingly able to hold the authorities to account for the administration of the country's natural resources in the country where the companies operate. Access to more information about the companies/corporations could also contribute to increased transparency, thereby highlighting any tax planning.

Ambition: Norway wants to evaluate and improve its LLR regulations and to contribute its experiences to the EU in connection with the evaluation that the EU plans to conduct on its own legislation in 2017/2018

Responsible institution: Ministry of Finance

Supporting institution(s): Pending evaluation in the Ministry

Start date: May 2015  End date: June 2017

Commitment Aim:

Country-by-country reporting (CBCR) is a means to increase transparency on how extractive industries operate across the globe. In 2015, the Norwegian Parliament decided that the government should review the effect of CBCR regulation. This commitment seeks to conduct a review of the effect of CBCR on alleviating adverse tax planning, and to consider how relevant information from subsidiaries and support functions in third countries can be included in CBCR.[Note31: PWYP Norway press release, http://www.publishwhatyoupay.no/en/node/16781. ]

Status

Midterm: Limited

The government has introduced amendments to the CBCR regulations which came into effect on 1 January 2017. As of 2017, all Norwegian multinational enterprises with an annual income above NOK 6.5 billion were obliged to provide CBCR for all countries in which they operate within 12 months of the end of the accounting year.[Note32: CBCR, https://www.skatteetaten.no/en/business-and-organisation/reporting-and-industries/bransjer-med-egne-regler/internprising/country-by-country-reporting/. ] Before this change, CBCR applied only to extractive companies. For more information, please see the 2016–2017 IRM midterm report. 

End-of-Term: Complete

Legislative changes in the Securities Trading Act came into effect on 1 July 2017, and consultations on the evaluation of CBCR regulation were carried out at a public hearing during autumn 2017.[Note33: Telephone interview with commitment PoC Marianne Irgens, Ministry of Finance, 9 October 2018. The consultation paper, https://www.regjeringen.no/no/dokumenter/horing-av-evalueringsrapport-om-land-for-land-rapportering-regelverket/id2576639/, and

https://www.regjeringen.no/contentassets/355189369a02429cb74ff85f09ac777a/evalueringsrapport-llr.pdf. ] It is unclear what the government has done concerning the input provided by the hearing.[Note34: Based on telephone interview with Marianne Irgens, Ministry of Finance, 9 October 2018. ]

The commitment is completed as the government has implemented the changes in regulation and law amendments, and the evaluation took place.  

Did It Open Government?

Access to Information: Marginal

With new CBCR regulations going into effect from July 2017, the scope of companies required to submit CBCR has been expanded. But stakeholder concerns regarding, for instance, the quality of how the evaluation covers adverse tax planning[Note35: The letter from Publish What You Pay Norway (in Norwegian only), page 3, https://www.regjeringen.no/no/dokumenter/horing-av-evalueringsrapport-om-land-for-land-rapportering-regelverket/id2576639/?expand=horingssvar&lastvisited=c81ffc55-1417-49df-be8e-e5c8d8ca49e5 ] and other criticism indicates that the extent to which this commitment is contributing to meaningful changes could be disputed. In addition, the limitations in the existing regulatory framework, such as the exemption for reporting from countries where less than NOK 800,000 is paid in taxes,[Note36: Tax Justice Network’s letter, https://www.regjeringen.no/no/dokumenter/horing-av-evalueringsrapport-om-land-for-land-rapportering-regelverket/id2576639/?uid=1dc79f1f-1ed6-4e74-89e0-2a402f264e1b&expand=horingssvar&lastvisited=c81ffc55-1417-49df-be8e-e5c8d8ca49e5 ] suggests that overall, this commitment has only led to marginal improvement in the practice of opening up access to information.

Carried Forward?

This commitment will not be carried forward to the next action plan but given the potential of CBCR to increase corporate accountability domestically as well as globally, it is recommended that the government continue working to enhance CBCR regulations.