Income from oil, gas and minerals is often one of the greatest sources of wealth for developing countries. But Governments and people living in these countries (about 3.5 billion) often do not see the benefits.
The Government of Zambia believes it is owed up to a $1 billion in unpaid taxes, from copper production.
According to Christian Aid, more than half of the copper exported from Zambia in 2008 was supposedly sent to the tax haven of Switzerland, but Swiss import data shows no Zambian copper passed through that country. So where did it go?
If companies are using tax havens to dodge paying tax, the money is typically channelled to a subsidiary company in the tax haven. The company can then pay little or no tax. The goods simply bypass the tax haven and go to the real destination country. And countries like Zambia miss out on the money needed to provide for its people.
Copper producers with subsidiaries in Zambia include Glencore International AG, Canada’s First Quantum Minerals and London-listed Vedanta Resources. Read more about these companies here.
How can we stop this?
Currently many mining, oil and gas companies only report their finances on a global or regional basis, making it impossible to know how much money is generated in a particular country and therefore how much tax should be paid.
It’s already possible!
The Hong Kong stock exchange already has a more limited form of country-by-country reporting in place.
The G20 has encouraged disclosures by the mining, oil and gas industries of payments made to governments.
The US Government has introduced the Dodd-Frank Wall Street Reform and Consumer Protection Act. This requires companies in the oil, gas and mining sector listed on the US Securities and Exchange Commission to have to report on their taxes and royalties paid on a country-by-country and project-by-project basis.
This makes it much harder for companies to hide their money in tax havens. It also means people can hold their governments to account for money in taxes they receive from oil, gas and mining.
Now it’s up to you
Email the Treasurer Wayne Swan to say that you’d like to see laws introduced in Australia that would require mining, oil and gas companies to have to report on a country by country basis.