Multinational corporations (MNCs) will soon have to publicly disclose more information on a country-by-country basis, says Transparency International (TI), a non-governmental organization that monitors corporate and political corruption around the globe.
The Legal Affairs Committee of the European Parliament voted unanimously for a Shareholders Rights Directive, which includes a requirement for MNCs to share more financial information to drive transparent behavior among global companies and help countries fight corruption.
This move comes at a time where governments and regulatory agencies rely heavily on tips from whistleblowers or leaked documents in order to carry out an investigation.
Under the public country-by-country reporting (CBCR) MNCs will be required to disclose critical information such as the amount of profit made, taxes paid, revenue generated and number of employees for each country where a subsidiary operates. Currently, MNCs report specifically on their operations in a consolidated global report, without any way of scrutinizing country specific operations.
“This kind of detailed corporate reporting can help to flag up possible corruption by shedding a light on special arrangements between companies and governments,” says Nienke Palstra, senior policy officer, Transparency International EU. “It will also improve the accountability of companies to the citizens of the countries where they make their profits.”
Tax packages remain another sticky issue. The vote comes in a time where the European Commission is zeroing in on the benefits of CBCR as part of the Commission’s tax transparency package, which calls for full disclosure of tax information between European countries— something that corporations keep quiet about.