Wednesday, January 27, 2010

On Google, France, banks, and Country by Country reporting

We are pleased to see an article in France's Le Monde newspaper which makes note of one of TJN's core issues:

"With the 'Google Affair' of January 7th, French people discovered, to their astonishment, that a super-rich multinational could, entirely legally, lighten its tax load by setting itself up in a country with low, even zero, taxes. A tax haven. It could undertake major commercial activity in France and derive great benefits from it, but pay the bulk of its taxes elsewhere, in Ireland where Google has its head office."

The article delves into the issue of transfer pricing - an issue of colossal importance where TJN is gearing up for a major project in due course - there's nothing especially new in Le Monde's analysis, but the focus is most welcome. It follows in the honourable footsteps of a major exploration of this subject in the context of the international banana trade, in Britain's The Guardian newspaper in November 2007, which you can find here.

Eva Joly, the crime-busting investigator who spearheaded the investigation into the gigantic, free-wheeling and significantly offshore Elf Affair from 1994, notes (loosely translated) that

"the awakening as to the importance of tax evasion by corporations is galloping ahead, judging by the mobilisation of non-governmental organisations" . . . . (Joly) compares the phenomenon to what happened to awareness of corruption in global commerce at the beginning of the 1990s: 'a battle that was misunderstood at the beginning, but which resulted in 1998 in an OECD convention requiring nation states to fight against corruption.' "

It is now considered astonishing, of course, that nobody thought seriously of this - trying hard to fight corruption -- before the 1990s. Offshore tax dodging, we hope, will head the same way - though the vested interests in this case are, to generalise, far bigger and more powerful than was the case with that ongoing struggle against narrowly-defined corruption.

And we like the end of this Le Monde article:

"According to Christian Chavagneux, co-author of the book "Les paradis fiscaux", one really effective measure would be to "require multinationals to publish, on a country by country basis, their turnover, their profits and their taxes. That way we could find out if their activities correspond to economic reality."

No economic sector is more important in the modern day than financial services. That is why it is essential to consider Country-by-Country reporting for banks, as a kind of Plimsoll Line to work out what they're up to. Read more on that here.

Click on our A-Z archive page to find the French version of our Country by Country reporting paper, and our German version.


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