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‘Fanciful and Misguided.’ Vodafone Enters Public Debate on Country-by-Country Reporting

August 12, 2011

By David McNair

David McNair is senior economic justice adviser at Christian Aid who formerly worked for British Red Cross. He holds a PhD in social geography from the Queen's University of Belfast.

Vodafone

Mangee/Flickr*

I’m pretty confident you won’t have read it, but this week’s edition of Transfer Pricing Week saw Vodafone’s tax director, John Connors, publicly enter the debate regarding Christian Aid’s campaign for country-by-country reporting.

For some time now we have been talking with Vodafone about tax and development and trying to convince it that it should get on top of this crucial issue. And Vodafone has acknowledged that we have ‘had some interesting discussions.

This week, that conversation went public – and this is something we welcome. We are campaigning for transparency after all.

Connors said in the article that ‘country-by-country reporting is a little misguided’ suggesting that our campaign is based on ‘fanciful numbers and figures of the impact of tax avoidance and transfer pricing.’

When we launched our first tax report, I was working in Ireland – where I got all kinds of abuse for the things we were saying – but things have changed.

Now, when we talk about tax and development and country-by-country reporting we are in good company. Since we started working on the tax, the G20, the OECD, the EU and the UN have started taking our proposal very seriously.

And as for the fanciful figures, the OECD now recognises that tax losses to developing countries are likely to be more than aid – and that’s certainly something worth considering.

One of the things we certainly weren’t wrong about was the importance of tax and development to companies.

Last year, we told Vodafone that in three years tax would be one of the most high profile issues for big business.

We certainly admit to getting our maths wrong there; it took just six months before, Vodafone, rightly or wrongly, became the subject of a high-profile corporate campaign on their UK tax payments.

Of course, companies like Vodafone are doing a lot of good in developing countries – the jobs they create, the products and services they provide, the infrastructure they invest in.

But transparency regarding tax payments is also crucial for two reasons. Governments tend to have better infrastructure, better protection of property rights and are more accountable to their people when they collect more tax.

And to encourage citizens to pay tax, they need to know that those taxes won’t be wasted and that the big players are paying their way.

Some businesses like Vodafone suggest that disclosing information would create more confusion as people don’t understand tax issues and would misinterpret the information. This sounds paternalistic, but I can see where they are coming from.

With the outrage and anger that has accompanied the austerity measures in the UK coupled with tax breaks for multinationals, it is easy for the facts to get lost. But surely that is more likely to happen in the absence of information than when information is disclosed.

David Gauke – the UK minister responsible for tax – seems to agree.He recently told leading UK businesses that ‘at a time when, across the board, the public expects greater openness, I think it could be in your long-term interests to engage more forthrightly in this discussion.

Christian Aid is open to learning from others’ perspectives. But in this case, we are not wrong.

Our thinking is just ahead of the curve – and surely that’s where any leading business would want to be.

You need a subsription to read the original Transfer Price Week piece, but here it is, just in case.

Cross-posted from the Christian Aid blog.

*Image license: Some rights reserved by mangee

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Disclaimer: Unless specifically stated to be the views of the Financial Transparency Coalition, the opinions expressed on this blog are solely the opinions of the individual blogger and are not necessarily those of the Financial Transparency Coalition.

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