Wednesday, January 06, 2010

Extractive industries and development - re-assessing the agenda

A few weeks ago our Director, John Christensen, participated at a conference on the role of the extractive industries in promoting development. The conference took place in Copenhagen, Denmark, and brought together a wide range of government agencies, private sector businesses, NGOs, academics, corporate responsibility specialists, journalists and others. A report on the outcomes of the conference has been prepared by Søren Kirk Jensen, an independent consultant, and you can download a copy of that report here. You can also access the presentations given at the conference here.

The conference covered a wide range of issues, including illicit financial flows and the role of tax havens in enabling huge sums to disappear without trace. Hence the focus, by Christensen and others, on the need to radically strengthen accounting transparency:

There are two essential reasons why transparency is needed in extractive industries. The first is to ensure that governments are able to secure a fair share of the value of the natural resources; and the second is to ensure that the money the governments gain actually ends up benefitting the public. The past has seen severe challenges related to both aspects. Anti-corruption is likewise relevant to tackle both bad business practices and bad practices by local stakeholders. It constitutes a central focus area not only in relation to the issue of companies obtaining resources below market value, but also in relation to their ability to ignore environmental and human rights issues.

The extractive industries, especially in poorer regions, are widely associated with corrupt practices. The corruption agenda is also evolving in new directions, with TJN pushing for tax evasion to be treated as a corrupt practice and for stronger measures against the enablers of corruption:

TJN called for tax evasion to be specified as a corrupt practice under the UN Convention against Corruption and dealt with as a predicate crime by the anti-money laundering program of the Financial Action Task Force. There is hence not a great distance between working against tax evasion and working against corruption more broadly. Civil society organizations should continue insisting that Global Compact expands the anti-corruption principle to include issues such as tax evasion and transparency on their agenda. Dealing with secrecy jurisdictions would to a large extent deal with the supply side of corruption; and a strengthened focus on transparency and accountability at country level not only on the revenue side but also on the expenditure side should help tackle the demand side of corruption.

It is also heartening to see that paying taxes is steadily moving onto the corporate responsibility agenda. Since launching its tax and corporate responsibility campaign in 2004, TJN has advocated that a company's track record in paying taxes when they're due, in the amount they're due, and in the place where they're due, should be a litmus test of its commitment to corporate responsibility. Denmark prides itself on being in the vanguard of the corporate responsibility agenda, so we are pleased to read the following in Jensen's report:

" . . . there is a growing recognition that companies’ social responsibility also includes issues such as accountability, transparency and the payment of taxes. Evidence points to these issues not being covered sufficiently through voluntary approaches."

The report covers a wide range of topics, many directly relevant to tax justice. A new agenda is emerging for the extractive industries, long over-due in our opinion, and we in civil society will play a key part in pushing these industries, no doubt kicking and screaming as they generally do, in these new directions.

Read the report here and taken particular note of the list of recommendations targeted at different actors in Denmark (pages 20 to 22).


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