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1 Early precedents of the Country-by-Country reporting: implications for the analysis of corporate power 25 September 2014 Matti Ylönen Doctoral student, University of Helsinki and Aalto University

2 My PhD will focus on the political aspects of corporate tax avoidance Earlier article: “For logistical reasons only? A case study of tax planning and corporate social responsibility reporting ” (co-authored w/ Matias Laine) Background / research material for this article Reports from the United Nations Center for Transnational Corporations (UNCTC) Body of earlier literature on the power of TNCs Background

3 Current initative issued in 2003 by a chartered accountant Richard Murphy Under his proposal, corporations would have to report e.g. the following items on c-b-c basis: Turnovers Profits Assets Taxes paid Names under which it operates Sales This would bring tax / risk planning in public domain and largely expand the transparency of currently privatized financial information What is country-by-country reporting?

4 1.Provide a mapping exercise on the early precedents of the country-by-country reporting The information provided challenges some established beliefs on this topic in academic papers 2.Contribute to the academic discussion on the reasons behind the recent success of c-b-c 3.Start developing a theoretical framework for analyzing the role of secrecy/publicity of information in the corporate planning activities The purpose of this paper

5 Completed policy responses for limited widening country-level transparency Extractive industry reporting Systematically important banks in the EU Policy level interest towards full c-b-c EU, IMF, OECD, the World Bank… Model template issued under the OECD BEPS project in September 2014 Babysteps (and a big leap?) towards c-b-c?

6 Lesage and Kaçar 2013: analyzed contemporary success factors and threats to c-b-c Wójcik 2012: discussed c-b-c from the viewpoints of different strands of IR research (working paper) Palan et al 2013, Urry 2014 etc.: discussing c-b-c as a recent initiative with a potential in democratizing corporate driven capitalism C-b-C in contemporary academic literature

7 The UNCTC reports: background Suggestions for expanding mandatory segmented reporting: 1.Significant subsidiaries and percentage ownership 2.List of associated companies and nature of relationship with parent 3.Disclosure of identity of parent company in reports of subsidiaries. 4.Disclosure of several information items on inter- company tansactions The UNCTC’s accounting work lost its importance as the IASC took the initiative The early precedents: UNCTC

8 ‘“Consolidated” financial statements should represent the full operations of the firm instead of, as at present, often only partial segments, with subsidiary or affiliated corporations reporting as separate corporations. In multinational firms, statements should be broken down on a “U.S.” and “all foreign” basis, in addition, there should be foreign financial reports furnished on a country-by-country basis. The flow of foreign investment, both to and from U.S. corporations, should be regularly disclosed, including identification of the nature of specific new U.S. corporate investments abroad and deposits in foreign banks as well as periodic identification of foreign loans or investment in U.S. corporations and international joint ventures.’ Nader, Green and Seligman 1976: Taming the Giant Corporation (pp. 176)

9 Four strands behind the current success of c-b-c: The tax justice movement Increasing interest in the tax-development nexus by the development community The concerns about the ethics and social contributions of the extractive industry The fight against illicit financial flows. Lessons from the 1970s omitted by L&K Current heterogeneity of global economic governance has clearly played a role today So has the financial media that has produced a large body of creative journalism Discussion: Lesage and Kaçar 2013

10 JK Galbraith: large corporations necessarily plan their prices, they do not reflect market mechanism Competitive markets – planning economy – states Galbraith wrote in the context of relatively closed US economy Barnet & Müller 1974: corporate planning has also an international dimension Corporate secrecy and corporate planning: foundations

11 Corporate secrecy is often an essential requirement for successful corporate (tax) planning Country-by-country reporting threatens this secrecy, thus reducing the planning functions of TNCs The information available for states and citizens consequently increases It is likely that the planning options for states over their tax regimes consequently increase Financial information is thus one essential factor in determining the balance of power in state vs. corporate planning Other aspects of corporate planning will be discussed in our forthcoming article with Teivo Teivainen Corporate secrecy and corporate planning: application

12 Need for discussion on the corporate planning framework and Shareholder capitalism Financialization Immaterial economy and economic globalization Situating the historical developments to the wider political economic context (debt crisis, trade policies etc.) Discussing the planning framework in light of the International Relations theories (Some) limitations of the draft version

13 Matti Ylönen Thank you

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