October 2017

To what extent do companies report on their tax payments?

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Key takeaways

� Only 2.5% of companies report comprehensively on their tax payments. In line with action 13 from the OECD’s ‘Based Erosion and Profit Shifting’ (BEPS) project, these companies provide a geographical breakdown of their tax payments and data on their operations, including sales, operating profit or the number of employees in each zone of operation. They also disclose the actual tax rate they pay and explain differences between this rate and the statutory rate.

� Nearly 1 in 10 companies (9.1%) fails to disclose any information on their tax payments.

� 44.4% of companies only disclose partial information, generally limited to the gross amount of tax they pay, with no geographical breakdown by operating country or region.

� Less than half of companies provide a breakdown of the taxes they pay by country or region; for one third of these companies the reporting covers less than half their activities.

� Nearly a quarter of European companies (24.9%) and a fifth of American companies (18.3%) provide comprehensive information on their tax payments, sales, operational results and the number of employees.

� Banks, financial institutions and companies from the extractive sectors seem to disclose their tax payments most extensively. These sectors have been subject to specific regulation , but they are also subject to most controversies, with 42.5% of financial companies and 26.2% of extractive companies facing controversies.

� Overall, 336 tax controversies have been identified representing nearly 4% of all cases observed in Vigeo Eiris’ database. Two-thirds of them (224) are considered cases of high severity.

� 17.1% of companies face at least one tax controversy, and of these, 16.4 % have been fined.

� Tax controversies mainly concern European and American listed companies, with 53.6% of European and 34.8% of American companies facing controversies. Cases are more easily identifiable in these continents, where the prevention of tax avoidance and sanctions of abuses correlate to the existence of a democratic framework and the freedom of the press.

� The cost of aggressive tax planning practices is estimated to be between at least USD 70 billion and USD 120 billion per year in developing countries, around USD 135 million per year in the USA, and between EUR 50 to 70 million per year in the European Union.

� In reaction to recent tax scandals, the OECD has launched the “Based Erosion and Profit Shifting” (BEPS) project, consisting of 15 core actions aimed at targeting tax evasion, ending bank secrecy and tax havens, and addressing massive corporate tax avoidance.

� In line with action 13 of the BEPS project, both the European Union and the United States have adopted regulations requiring multinationals to provide tax authorities with their tax payments on a country-by-country basis.

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IntroductionNumerous scandals have emerged in recent years revealing large companies’ involvement in tax havens and offshore centres – causing outrage amongst citizens and government organisations alike. NGOs have long called for transparency in the tax affairs of large corporations, criticising the tax avoidance schemes which hamper both social and economic development. The United Nations Conference on Trade and Development (UNCTAD) estimates the cost of tax avoidance to developing countries is between USD 70 billion and USD 120 billion per year, whilst International Monetary Fund (IMF) researchers evaluate that developing countries lose more than USD 200 billion per year1. Developed countries are affected too. The European Parliament believes EUR 50 to 70 million are lost each year in the EU because of tax abuse2. A recent Oxfam report3 shows that tax dodging by multinational corporations4 costs the US approximately USD 135 billion each year impeding crucial investments in education, healthcare, infrastructure, and other forms of poverty reduction.

Since 2009, the OECD has been the linchpin of a major overhaul of the international tax architecture, whose aim is fighting against tax evasion, ending bank secrecy and tax havens, as well as addressing massive tax avoidance by multinational corporations. In 2015, with the endorsement of the G20 leaders, the OECD has launched its “Based Erosion and Profit Shifting Project” comprising 15 actions to curb international tax avoidance. The BEPS aims to increase tax transparency, promote information exchange and to close gaps in existing international rules. On June 7 2017, 68 countries signed a multilateral convention implementing tax treaty related to measures to prevent BEPS. In line with the OECD requirements, the European Union and the United States have adopted new regulations requiring multinationals to provide tax authorities with their tax payments and operational figures on a country-by-country basis.

Despite these efforts to encourage tax transparency and prevent tax evasion, the task remains complex and consensus is yet to be reached on a common list of countries considered as tax haven or offshore centres.

This study is based on Equitics©, the exclusive methodology of analysis and rating developed by Vigeo Eiris in 2002. It identifies the tax reporting structures published by companies and gives some examples of detailed tax disclosures. It also describes examples of allegations, investigations or fines resulting from tax avoidance practices or tax fraudulent behaviours. Finally, it establishes a picture of recent developments to international standards.

1 “Financingfordevelopment:keyChallengesforpolicymakers”–EURODAD-JesseGriffiths-July2015

2 “Commissionunveilsanti-taxavoidancepackage”–EUObserver-January282016

3 “RiggedReform:UScompaniesaredodgingbillionsintaxesbutprposedreformswillmakethingsworse”–Oxfam–April122017

4 https://www.oecd.org/g20/topics/taxation/

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TaxtransparencyisassessedbyVigeoEirisunderthesustainabilitydriver“Contributiontosocialandeconomicdevelopment”.

InlinewiththeOECDBaseErosionShiftingProjectandtheOECDTaxModelConvention,companiesarerequiredtoadherethefollowingprinciples:

� Promotingaresponsibletaxstrategyandprovidingdetailedinformationontaxpaymentsand operational activities

� Justifyingtheirpresenceinoffshorefinancialcentersandnon-compliantjurisdictions.

I – How do companies report on taxes?Amongthe1,139companiesunderreviewinoursamplebetweenJanuary2016andFebruary2017:

� 9.1% (104) do not provide information on their tax payments.

� 44.4% (506) report only on gross taxes paid, withnobreakdownbyregionorcountry.

� 28.1% (320) of companies only make a partial tax disclosure.Inmostcases,disclosurefocusesontaxespaidincountriesorregionsrepresentingmorethan50%oftheiroperations.

� 15.9% (181) provide more significant information.Aswellasabreakdownoftaxespaidbycountryorregion,theyreportonsales,and/oroperatingprofit,and/ornumberofemployeesperoperatingregion.

� Only 2.5% of companies provide a comprehensive tax reporting. In addition to geographicalinformationontaxespaid,sales,operatingprofitornumberofemployees,theydeclarethedifferencebetweenstatutorytaxratesandtherateactuallypaid.

Vigeo Eiris findings

15.1%

.34.1%

4.1%

26.5%

12.4%

19%

Taxes paid incountries/

regions coveringless than 50% of

operations

Taxes paid incountries/

regions coveringmore than 50% of

operations

Tax rate actuallypaid

Sales per zone Operating profitper zone

Number ofemployees per

zone

Structure of corporate reporting on tax payments and operations (% of communicative companies)

a) Mapping reported information

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Action13oftheOECD“BasedErosionandProfitShiftingProject”aimstoenhancetransparencyfortaxadministrations.Multinationalcompaniesarethereforerequiredtoprovideaggregateinformationannually,ineachjurisdictionwheretheydobusinessrelatingtotheglobalallocationofincomeandtaxespaid,togetherwithotherindicatorsofthelocationofeconomicactivitywithintheMNEgroup.Companiesmustalsodiscloseinformationaboutwhichentitiesdobusinessinaparticularjurisdictionandthebusinessactivitieseachentityengagesin1.

Regardingcorporatetaxreporting,itappearsthat:

� Less than half of companies disclose a geographical breakdown of their tax payments, and their reporting is often only partial.Overall,onlyathirdofbusinesses(34.3%)reportontaxespaidincountrieswheretheyhavetheirmajoroperations,whilefor15.1%ofcompanies,theinformation provided covers less than half their operations.

� Although tax reconciliation forms a primary source of information for stakeholders to understand the relationship between the group’s profits and the tax charge, few companies (4.1%) communicate the actual tax rate paid, and explain the reasons of the differences between the actual tax rate and the statutory rate. Whenactualgrouptaxratesarelowerthanthestatutoryrate,thismaypromptconcernsthattaxavoidancestrategiesarebeingemployed,evenwherethisisnotthecase.Increaseddisclosuremaythereforepreventstakeholderquestions2.

� The level of information relating to business’ activities is somewhat limited: companies communicate most about sales per zone (26.5%), followed by the number of employees (19%), while operating profit per zone is disclosed by only 12.4% of companies.

Examples of detailed reporting:

Sanofi reportscomprehensivelyontaxespaid. Its reporting covers:

� Taxespaidinkeyoperatingcountries:Sanofi reportsthatin2015theGroup’sIncomeTaxchargeonBusinessOperatingIncomewasEUR2.2billionworldwide.Thiswasbrokendownbyregionasfollows:WesternEurope(42%),Emergingmarkets(27%),USA(24%)andothercountries(7%).

� Sales per zone: WesternEurope(21.7%),Emergingmarkets(32.4%),USA(36.2%)andothercountries(9.7%)

� Numberofemployeesperzone:WesternEurope(38%),Emergingmarkets(42%),USA(15%)andothercountries(5%).

� Explanationforsignificantdifferencesbetweenanticipatedtaxrateandactualtaxratepaid: In adedicatedtaxfactsheet,Sanofiexplainsthedifferencebetweentheactualtaxrate(13.5%)and thestandardcorporateincometaxrateapplicableinFrance(34.4%).Thisdifferenceisexplainedbyseveralfactorssuchastaxratesapplicabletoforeignsubsidiaries,taxdeductions,deferredtaxes,ortheimpactofchangesinthetaxationofdividendsinFrance.

Huntington Ingalls Industry comprehensively reportsontaxespaid.Itsreportingcovers:

� Taxespaidinkeyoperatingcountries:The companyreportsontaxespaidintheUS.

� Sales per zone: The company earns approximately96%ofitsrevenuefromtheUSgovernment.

� Explanationforsignificantdifferencesbetweenanticipatedtaxrateandactualtaxratepaid: The companyexplainsthatin2015,itsactualtaxrate(36.1%)differedfromthefederalstatutoryrate(35%).Thiswasprimarilyaresultoftheamountofthegoodwillimpairmentthatisnotamortizablefortaxpurposesandothernon-deductibleexpenses,partiallyoffsetbythedomesticmanufacturingdeduction.In2014,itsactualtaxrate(33.3%)differedfromthefederalstatutoryrateprimarilyasaresultofthedomesticmanufacturingdeduction,partiallyoffsetbytheamountofthegoodwillimpairmentthatisnotamortizablefortaxpurposes.

1 http://www.oecd.org/ctp/beps-frequentlyaskedquestions.htm

2 http://www.ey.com/Publication/vwLUAssets/Tax_Transparency_-_Seizing_the_initiative/$FILE/EY_Tax_Transparency.pdf

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56.7

%

18.4

% 24.9

%

39.6

%

42%

18.3

%

82.9

%

9.6%

7.5%

67.2

%

21.6

%

11.2

%

Insufficient or limited reporting Partial reporting Significant reporting

Corporate tax reporting: comparison by zone (%)

Europe North America Asia Pacific Emerging Markets

b) Geographic and sectoral specifics

Inourquestioning,weassesscompanies’levelofreporting on a scale from 1 to 4:

� A score of 1 is granted to companies that either donotreportontheirtaxpaymentsatall,oronlyreportongrosstaxespaidwithnobreakdownbyregionorcountry.

� Ascoreof2isgrantedforpartialcorporatetaxreportingwithageographicalbreakdownofactivities,butnoreportingonoperationalfigures

� Ascoreof3isgivenwhencompany’taxreportsincludeageographicalbreakdownandsomeoperationalfigures.

� Ascorea4isgivenwhentaxreportingincludesageographicalbreakdown,operationalfigures,andspecificsontheactualrateoftaxpaid,aswellasanexplanationwhenthisratediffersfromthestatutoryrate.

Basedon1,139companiesunderreview,theglobalaverage score is 1.67/4.

� North American companies underreviewachieve the highest average score (1.81/4), followedbyEuropeancompanies(1.71/4),companies located in the emerging markets (1.44/4)andAsiaPacific(1.26/4).

� However the proportion of European companies (24.9%) disclosing a significant or a comprehensive tax report is higher than the proportion of North American companies (18.3%).

� Asiancompaniescommunicateleastabouttheamountoftaxpaid.For82.9%ofAsiancompanies,eithernotaxinformationwasfound,ortheyonlyreportthegrosstaxpaid.

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1.1

1.2

1.2

1.5

1.5

1.5

1.5

1.6

1.7

1.7

1.7

1.8

2

2.1

2.2

0 1 2 3 4

Transport and Logistics

Chemicals

Pharmaceutical & Biotechnology

Technology Hardware

Food

Industrial goods and services

Mechanical component and equipment

Hotel Leisure Goods and services

Financial Services- Real estate

Financial Services -General

Supermarkets

Mining and metal

Banks

Energy

Electric and gas utilities

Average score on the tax transparency question (on scale from 1 to 4)

Lookingat15sectorshavingwithasampleofatleast30companieseach,itappearsthatcompanies from the extractive industries(ElectricandGasUtilities,Energy,MiningandMetals)andfinancial

sectors(Banks,FinancialServices)disclose their tax payment reports most extensively.

Thiscanbeexplainedbythefactthatthese sectors have been subject to specific regulations and country-by-countryreportingrequirementsearlierthanothersectors.

1. In the extractive sectors, advocacy for companies to disclose their payments to government1 came from:

� the Extractive Industries Transparency Initiative (EITI)2-3: createdin2002,theEITIAssociationwassetupbyanumbercountries,naturalresourceextractivecompanies,andcivilsocietyorganisationstodevelopaframeworkforthedisclosureofpaymentstogovernments.Updatedin2013,theEITIStandard,requirescountriestopublishinformationonkeyaspectsoftheirnaturalresourcesmanagement,basedoncompaniesdisclosure.Thisincludeshowlicencesareallocated,howmuchtaxandsocialcontributionscompaniespayandwherethismoneyendsupinthegovernmentatbothnationalandregionallevel.

� the U.S Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-FrankAct):UnderSection1504oftheDodd-FrankAct,allcompaniessubjecttotheSecuritiesExchangeCommission(SEC)rulesandengagedinthecommercialdevelopmentofoil,naturalgasormineralsarerequiredtoannuallydisclosepaymentstofederalandforeigngovernments.Undertherule,companiesdisclosethetypeandamountofpaymentsbyprojectandbygovernmentforallpaymentsthatequalorexceedUSD100,000individuallyorintotal.

� the European Union Amendments to the EU’s Transparency and Accounting Directives,whichrequirepaymentstobedisclosedtogovernmentsbycertainlargeundertakingsandpublicinterestentitiesengagedinnaturalresourceextractionorlogging.

1 Disclosinggovernmentpayments-implicationsfortheoilandgasindustry-Ernst&Young(2013)2 https://eiti.org/sites/default/files/documents/eiti_factsheet_en.pdf3 https://eiti.org/sites/default/files/documents/english-eiti-standard_0.pdf

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Examples of detailed tax reporting:

The South32 UnderlyingEffectiveTaxRate(ETR)forFY2016was36.6%.ThisreflectsthegeographicdistributionoftheGroup’sprofits.

ThecorporatetaxratesapplicabletoSouth32include:Australia30%;SouthAfrica28%;Colombia40%;andBrazil34%.Shouldcurrentconditionsprevail,theGroup’sUnderlyingETRislikelytocontinuetoexceed30%.

Algonquin Power & Utilities reports on:

� taxespaidinkeyoperatingcountries,theU.S. and Canada

� operating profit per zone

� explanationforsignificantdifferencesbetweenanticipatedtaxrateandtheactualtaxratepaid: The Company reports that the provision for incometaxesrepresentsaneffectivetaxratedifferentthantheCanadianenactedstatutoryrateof26.5%(2014-26.5%).Thedifferenceswereduetotherecognitionofdeferredcredit,theeffectofdifferencesintaxratesontransactionsinandwithinforeignjurisdictionsandchangestotaxrates,thenon-taxablecorporatedividend,non-controllinginterestsshareofincome,andproductiontaxcreditamongothers.

2. In banking and financial sectors,ourlastsurveyoftheDiversifiedBankssector,publishedinDecember2016,showedthat:51%ofthebanksunderreviewcommittoencourageclients’responsibletaxpraticesandtopreventtaxavoidance;45%ofbanksreportedsomemeasuresto mitigate the potential negative effects stemming fromclientstaxadvisoryservices.However,onlyfourofthesebanksshowedevidenceofcomprehensivemeasurestopromoteresponsibletaxpracticesbyclients.Asreportedinthesecondpartofthispaper,taxallegationsarecommoninfinancialsectorsdespite71%ofdiversifiedbanksreportingtransparentlyontaxespaid.

Examples of tax policies and detailed tax reporting:

a. Commitments related to the adoption of a responsible tax strategy:

Rabobank hasissuedataxpolicystatementwhichincludes:

1-HowdoesRabobank’staxpolicycomeabout?2-Rabobank’srelationshipwithtaxauthorities3-Taxplanningpolicy4-DevelopingCountryPolicy5-ClientsPolicy6-Rabobank’sviewofinternationaldiscussionsonthetaxpoliciesofmultinationalcompanies

Rabobank’staxpolicyisdevelopedandimplementedbyaspecialisedtaxdepartment.Thisdepartmentisresponsibleforalltaxmatterswithintheentiregroup.Thisresponsibilityincludes,forexample,providingRabobankclientswithtax-relatedinformation,ascertainingthatthebank’sproductsmeetapplicabletaxregulationsandensuringthatRabobankitselfcomplieswithallitstaxobligations.

Intesa Sanpaolo’staxstrategyincludes:

� GuaranteeingcompliancewiththespiritaswellastheletterofthetaxlawsandregulationsinallthecountrieswheretheGroupoperates.

� Payingtaxesaccordingtowherevalueiscreated.

� Initiativesaimedatcombattingassetsintaxhavensarealsounderimplementation.SpecificsupervisorymeasuresandtaxriskassessmentsareintroducedupontheGroup’sentryintonewmarkets,evenifoperationsarelocatedininjurisdictionsthatarenottransparentontaxrules,orwhentheseoperationsarepartofcomplexcorporatestructures

� AcomprehensiveGroup-levelpolicyformonitoringandmanagingclientfiscalriskshasbeeninplacesinceSeptember2015.Thepolicyprovidesrulesontaxationcomplianceandappliestoallproducts,servicesandoperationsofferedtocustomersincludingbespokeproductsandadvisoryservices.Thepolicyappliestoallsituationswherethebankplaysanactiverolewithcustomers,andstatesthatallproductsandservicesaresubjecttocompulsoryreviewbytheTaxDepartment.Forspecialoperations,thepolicyprovidesachecklistbasedonnationalandinternationalstandardstoallowanyinconsistenciestobedetected.

� Finally,aspecificpolicyhasbeeninplacesince2013whichappliestoprivatebankingoperationsintheinternationalsubsidiariesofSwitzerlandandLuxembourg,focusingagainstmoneylaunderingbutalsoincorporatingaspectsoftax.

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b. Detailed tax reporting

The Royal Bank of Scotlandreportstheamountoftaxespaidglobally,aswellasintheUKwheremostofitsactivitiesarebased.Italsodisclosestheamountoftaxespaidbyregion:UK,EMEA,Asia-Pacific,AmericasnetofCorporationtaxrefund.

IncompliancewiththeEuropeanCommission’sCapitalRequirementDirectiveIV,RBSdisclosesitsfullcountry-by-countrytaxpaymentsonline.Foreachcountryinwhichitoperates,RBSdiscloses:theincome,profitorlossbeforetaxes,taxespaid/received,subsidiesreceivedandheadcount.

Inaddition,Deloittehasissuedanindependent‘Country-by-CountryReportingAssuranceReport’tothemembersofTheRoyalBankofScotlandGroupPlcandUlsterBankIrelandLimited.

Specific sectorial regulations for financial companies on tax transparency have also been adopted:

� In April 2013, the European Union adopted the Capital Requirement Directive (CRD IV),whosearticle891requiresbanksandfinancialinstitutions(investmentbanks,brokersdealers,assetmanagersetc.)todiscloseprofitsmade,taxespaidandsubsidiesreceived,aswellasturnoverandnumberofemployeesforeachcountrywheretheyoperate.Thisinformation,whichisincludedinbanks’auditedannualreports,hasbeenpublicsinceJuly2015.ThepurposeofCRDIVwastoregulatebankingandinvestmentactivitiesintheEU,butlateinthelegislativeprocessaCBCRrequirementwasintroducedintotheDirective.

� On June 21 2017, the European Commission also adopted new tax transparency rules for intermediaries2,suchaslawyers,accountants,taxandfinancialadvisors,banksandconsultants,sincecertainintermediariesactivelydesign,promoteandsellschemeswiththespecificaimofhelpingtheirclientstoescapetaxation.SuchpracticeswerehighlightedinparticularbythePanamaPapersscandalthatemergedinApril2016whentheSüddeutscheZeitungandtheInternationalConsortiumofInvestigativeJournalists(ICIJ)releasedinternaldocumentsfromMossackFonseca,aPanamanianlawfirmthatsellsanonymousoffshorecompaniesaroundtheworld.FivemonthsafterthereleaseofthePanamaPapers,anewscandal–knownasBahamasLeaks-cametolight.Thisnewsourceofinformationfromtheworldofoffshoretaxhavenscontainedthenamesofdirectorsandsomeshareholdersatnearly176,000shellcompanies,trustsandfoundations.

Encourage by stricter regulations, companies from the extractive and financial sectors tend to issue better country-by-country tax disclosure. However, they also face the most controversies.

1 Directive2013/36/EU2 “QuestionsandAnswersonnewtaxtransparencyrulesforintermediaries”-EuropeanCommission,inhttp://europa.eu/

rapid/press-release_MEMO-17-1677_en.htm

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2-Corporate tax controversies: what do they reveal?BasedonVigeoEiris’database:

� 336 controversies have been identified, mainly relatedtocompanies’lackoftransparency,taxavoidanceschemes,taxfraud,presenceinoffshorecenters,ordisputesoverroyalties.

� 17.1% of companies face at least one tax controversy, andofthese16.4%havebeenfined.

� Tax controversies represent 3.89% of all controversies of our database.

� In 66.6% of cases, the controversies’ severity is assessed as ‘high’ -takingintoaccountthenatureoftheallegedfacts,thescaleofimpactonstakeholders,thelevelofmanagementinvolved,andthereputational,financial,legalandoperationalimplicationsforthecompany.Suchcasesinvolve,example,asignificantandnon-justifiedpresenceinataxhaven,taxavoidancepracticessuchastransferpricinganddisputesoverroyalties.ThesefactsareeitherrevealedbythemediaorNGOsorinvestigatedbyregulators.

� In 60.7% of cases companies simply reacted to controversies, issuingageneralstatementinwhichtheyacknowledgeinvestigationsinprocessorrefertorespectingofregulations,butprovidenofurtherdetailsoncorrectivemeasuresorengagementwithstakeholders.

� Remediative actions have been taken in 5.7% of the cases under review.

� No reaction was observed in 33.6% of cases.

� Tax controversies mainly concern European and American listed companies, with53.6%ofEuropeanand34.8%ofAmericancompaniesfacingcontroversies.Casesaremoreeasilyidentifiableinthesecontinents,wherethepreventionoftaxavoidanceandsanctionsofabusesarecorrelatedtotheexistenceofademocraticframeworkandthefreedomofthepress.Thereisstillanoveralllackofinformationandtraceabilityconcerningtaxavoidanceindevelopingcountries,andcontroversialbehavioursremainonlymarginallysanctioned.

� Companies most affected by tax controversies belong to the financial and the extractive industries, with42.5%offinancialcompaniesand26.2%ofextractivecompaniesfacingcontroversies.

a. Geographic specifics

� 53.6% of controversies cases(180/336)are faced by companies headquartered or listed in Europe. UKcompaniesarecitedin11.3%cases,followedbyFrenchcompanies(11%),Italiancompanies(8.9%),Germancompanies(6.5%),andSwisscompanies(5%).

� 34.8% of controversy cases involve companies listed in North America.In29.8%ofcasestheseareAmericancompanies.

Regarding the location of controversies1,reportedcasesoccurmostfrequentlyinEurope(37.5%),NorthAmerica(23.3%),LatinAmerica(13.6%),Asia(10.5%)andtheCaribbean(7.1%).

34.8%5.

4%

Origin of companies involved in controversies

Asia Pacific Europe North America Emerging markets

3.1%

Location of controversies

Africa Caribbean Asia EuropeNorth America Latin America Oceania

1 Countrieswherecontroversieshappen: Asia:Singapore,HongKong,;SouthKorea,Indonesia,TimorLeste,India,China,Japan,Malaysia,Vietnam

Africa: Niger,Tchad,Algeria,Nigeria,Zambie,Tanzanie,Angola,BurkinaFaso,Angola,Uganda,Mauritius Europe: Switzerland,theNetherlands,Ireland,Belgium,UK,Italy,Luxembourg,France,Germany,Spain,Malta,Monaco,Finland,Romania,Poland,Hungary,Norway,Austria,Denmark Oceania:Australia North America:UnitedStates,Canada Latin America: Panama,Brazil,Argentina,Mexico Caribbean:CaymanIslands,Bahamas,VirginIslands,TrinidadandTobago,Bermuda,AntiguaandBarbuda,Barbados,Dominica,Jamaica,Grenada;SaintKittsandNevis;SaintLucia;SaintVincentandtheGrenadines

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Examples of controversies

On29thJanuary2015,theNGOCoalitionagainstBayerDangers(CBGNetwork)accusedBayer oftaxpracticesthatdamagetaxpayersandlocalmunicipalitiesinseveralcountries.

The NGO states that Bayer has systematically transferredprofitstolowtaxcountriestoreduceitstaxburden,allegedlydamagingcontributorsinGermany,theUnitedStatesandFrance.TheNGOstatesthattheCompanyopenedfifteensubsidiariesandtransferredtrademarksandsharesworthEUR1.4billiontotheNetherlands,doubledthefundsofoneofitsaffiliatesinBelgium,andprofitsfromconcessionsforinsurancesinLuxembourg.Thishasbeendone,accordingtotheNGO,tobenefitfromthesecountries’reducedbusinesstaxes.

ItalsoclaimsthatBayerconductstaxdumpingbychangingthedistributionofresultstomakeprofitswheretheywon’tleadtocosts,andlosseswheretaxesarehigher.AccordingtoCBGNetwork,Leverkusen,thecitywhereBayerisheadquartered,hadtocreateemergencybudgetsbecauseoftaxlossesincurredbythefactBayerspaidalmostnotaxesforyears.

TheNGOconsidersBayer’spracticesa“destructivetaxrace”,allegingminimalcontributionstocommunityfinancing,asthecompanyeschewsitsresponsibilitytowardsthegeneralpublicattheexpenseoftaxpayers,whoareleftwithrisingtaxesandlevies.

Bayerreactedtotheaccusationstatingthattaxesarepaidinallrelevantcountriesonthebasisoftheaddedvaluegeneratedthereandaccordingtolocallegislation.TheCompanyalsoclaimedthat,in2013,itpaidEUR795millionintaxesinGermany,accountingfor48%ofallincometaxpaidovertheyear,eventhoughonly12%oftheGroup’ssalesweregeneratedinthecountry.Furthermore,Bayersaysthatthereare“severalfactualerrors”intheNGO’saccusations.Forexample,contrarytoCBGNetworkclaims,theCompanystatesthatithasnotreduceditstaxliabilitybyceasingtousetheScheringbrandnameafteracquiringScheringAGinGermany,andthatthebrandnameandtrademarkrightsforitsAspirinbrandhavenotbeentransferredtotheNetherlands.Bayerclaimsthat“thesetrademarks are registered in Germany and lead to taxableincomethere”.

InApril2015,Metro’sVietnamesestoresreceivedafineofalmostUSD3millionfortaxevasion.AccordingtotheEnglisheditionoftheTuoiTre(Youth)newspaperinVietnam,Metrofirstcameunderscrutinyoversuspicionsoftransferpricingbackin2012.

Independent investigations cleared the company ofwrongdoing.ButtheGeneralDepartmentofTaxationlauncheditsowninvestigationandaftertwomonthsconcludedthecompanyhad“committedwrongdoingsworthVND507billion(USD23.63million)inatransferpricinginspection”.MetroVietnamhasbeenorderedtopayVND62.64billion(USD2.92million)intaxarrears,adeputyministeroffinanceconfirmedtoTuoiTre.

The company did not react to the case

1. OnAugust30,2016,theEuropeanCommissionordered AppletopayuptoEUR13billion(USD14.5billion)intaxesandinteresttoIrelandafterrulingthatIrelandgrantedillegaltaxbenefitstoApple,allowingittopaysubstantiallylesstaxesthanotherbusinessesforseveralyears.Theinvestigation,launchedthreeyearsago,foundthatApplehadpaid1%taxonitsEuropeanprofitsin2003andabout0.005%in2014,whilethestandardrateofIrishcorporatetaxis12.5%.Inaddition,thecommissionconcludedthatIreland’staxarrangementswithApplebetween1991and2015enabledAppletoattributesalestoa“headoffice”thatonlyexistedonpaperandthereforecouldnothavegeneratedsuchprofits.

2. InDecember2015,followingataxinvestigationconductedbytheItaliantaxoffice,ApplehasbeenfinedEUR318million(USD347million)formovingfundstoIrelandinordertoavoidpayingtax. Apple has agreed to settle the case after months ofnegociations,havingbeenaccusedoffailingtodeclareincomegeneratedinItalybetween2008and2013worthEUR879millionbytransferringthisamounttoitsIrishsubsidiarybenefittingfromthecountry’slowertaxrate.Ireland’scorporatetaxearningsfromnormalbusinessactivitiesarereportedtobeat12.5%whilethisrateis27.5%inItaly.Applewillalsosignanewtaxaccordforfiscalyears2015onwards. InearlyDecember,Apple’sCEO,Mr.TimCook,reportedthat“Applepayseverytaxdollar”itowes.However,thecompanydeclinedtocommentonthesettlementandtaxofficialsonlyconfirmedmediareportsonApple’staxsettlementagreement.

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b.Most exposed sectors

Morethantwothirdsofidentifiedtaxcontroversycasescomefromeitherthefinancialsectors(42.5%)ortheextractivesectors(26.2%).

Thediversifiedbankssector,consistingofglobalbankswithassetstotallingatleastEUR200billion,countsformorethan30%oftotalcases.Onlyeightoutof31banks1underanalysisarenotinvolvedinsuchcontroversies.ManyofthesebankshavebeeninvolvedinmostrecentscandalssuchastheBahamasLeaks(September2016),thePanamaPapers(April2016),orLuxleaks(November2014)revealedbytheInternationalConsortiumofInvestigativeJournalists(ICIJ).Someofthemaresubjecttoenquiriesregardingtaxfraudulentbehavioursorfortheirinvolvementinstrategiesthatledtoclienttaxevasion.Inaddition,theyarealsocarefullyscrutinisedbyNGO’ssuchasOxfam2,CCFD3,orActionAid4,whichcondemnprofitsmadeintaxhavens.

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0 20 40 60 80 100 120

Pharmaceuticals and…

Industrial Goods and Services

Insurance

Tobbacco

Food

Financial Services

Oil Equipment and Services

Mining and Metals

Retail and Specialised Banks

Electric and Gas utilities

Energy

Diversified Banks

Number of tax controversies

1 CaixaBank,RABOBANK,SvenskaHandelsbanken,INGGroup,DanskeBank,StandardChartered,Swedbank,BANKIA

2 “Openingthevaults:theuseoftaxhavensbyEurope’sbiggestbanks“–Oxfam–March2017,https://www.oxfam.org/sites/www.oxfam.org/files/bp-opening-vaults-banks-tax-havens-270317-en_0.pdf

3 «Surlapistedesbanquesfrançaisesdanslesparadisfiscaux»-ComitéCatholiqueContrelafaim(CCFD)-16Mars2016

4 http://www.actionaid.org/cat/tags/tax-havens

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Examples of controversies1:

On21stSeptember2016,theInternationalConsortiumofInvestigativeJournalists(ICIJ)releasedasetofnearly1.5milliondocumentsfromtheBahamascorporateregistry.The‘BahamasLeaks’havebeenincludedinthelarger‘OffshoreLeaksDatabase’,whichhasinformationonhalfamillionoffshoreaccountsandbusinesses,andgathersthedatapublishedinpreviousleaks,suchasthePanamaPapers.Theleakeddocumentsprovide names of politicians and others linked tomorethan175,000Bahamiancompaniesregisteredbetween1990and2016.Accordingtothedata,Credit Suisseisamongthebanksthatcreatedoffshorecompaniesfortheirclients(9,516companies).

TheBahamashaslongbeenontheradaroftaxofficialsandgovernmentsaroundtheworld.ItisconsideredasafinancialoffshorecenterbytheInternationalMonetaryFund(IMF).InJune2015,theEuropeanUnionplacedit,alongwith30othercountries,onalistofun-cooperativetaxhavens.In2000,theOECDplacedtheCaribbeannationonablacklistofcountriesthataidtaxdodging.Itwasremovedfromthelistthefollowingyear,afteritrushedthroughninenewlaws.However,theBahamaswasplacedontheOECD’s‘graylist’in2009,alessseverecategorywhich“nonethelesssignifiednonconformitywithinternationalstandards,”accordingtotheICIJ.

CreditSuissestatedthattheBahamasCommercialRegisterisaccessibletothepublicandinformationoncompanystart-upsisprovidedonrequest.Thebankclaimstocomplywiththeapplicablelaws,rulesandregulationsofthecountriesinwhichitconductsbusinessandpursuesapolicyoftaxcompliance.Thebankaddedthat,since2013,ithasintroducedandconcludedprogrammesfortaxregulationinmanycountries,whereprivateclientsmustprovideevidenceoftheirtaxcompliance.Forcompanies,theidentityofthird-partybeneficialownersmustbeestablishedinaccordancewithstatutoryprovisionsgoverningthepreventionofmoneylaundering.

InFebruary2016,BelgianstateprosecutorsescalatedaprobeintoUBS over allegations of moneylaunderingandorganisedtaxfraudattheSwissbank.TheBrusselsstateprosecutor’sofficesaidthatthe“bankissuspectedofhavingdirectlyapproachedBelgiancustomers(withoutgoingthroughitsBelgiansubsidiary)withthegoalofencouragingthemtosignuptotax-evasionstructure”.Theinvestigationincludes“laundering,exercisingillegallytheprofessionoffinancialintermediaryinBelgium,andseriousandorganisedtaxfraud”.

BelgianprosecutorssaidtheywereabletofirmupthecaseagainstUBSthroughcooperationwithFrenchauthoritiesandtheworkofaninquirycommittee.

In2014,BelgianpolicecarriedoutraidsatthebankandatthehomesofaclientandofUBSBelgiumChiefExecutiveMarcelBruehwiler,whowaschargedatthetime.Thebank’sBelgiansubsidiary,whichemployedsome60staffincluding20privatebankers,hassincebeensoldtoBelgianprivatebankPuilaetcoDewaay.

Reactingtothecase,UBSsaidinastatement:“TheBelgianauthoritieshaveconfirmedtodaybywayof a press release that the investigating magistrate hasopenedaformalinvestigationagainstUBSAG”.“Anydiscussionofpotentialchargesatthisstageispremature”.

InApril2015,FrenchauthoritiesorderedHSBCHoldingsPlctopayUSD1.07billioninbailforacriminaltax-evasioninvestigationinvolvingitsSwissprivatebank.HSBC said in a statement that: “It has beenplacedunderformalcriminalinvestigationbytheFrenchmagistratesinconnectionwiththeconductofHSBC’sSwissPrivateBankin2006and2007forallegedtax-relatedoffences”.

Theannouncementfollowedthebank’sNovemberdisclosurethatitsHSBCPrivateBankunitinSwitzerlandhadbeenplacedunderpreliminaryinvestigationbyFrenchauthoritiesexaminingwhetherithadhelpedwealthyclientsduckFrance’stax-reportingrequirements.HSBCwasthenrequiredtopostabailbondofEUR50millionthen.

FrenchtaxauthoritieshavebeenexaminingHSBCsinceHerveFalciani,aformerinformationtechnologyworkeratitsprivatebankinGeneva,stoledatafromclientaccountsopenedbefore2006andturneditovertoinvestigators.

1 “Bahamasfiles:newleakexposesoffshore‘taxhaven’dealingsofpoliticians,companies“-RT-22/09/2016 “Bahamasfilesleaksexposepoliticians’offshorelinks”-TheGuardian-21/09/2016 “BahamasLeaks’putsspotlightonUBSandCreditSuisse”-Swissinfo-22/09/2016 Credit Suisse’sfeedbacktoVigeoEiris-27/10/2016 “MichelSapin:«LaSociétéGénérales’engageàlatransparence»surles«Panamapapers»”-LeMonde-06/04/2016 “SociétéGénéraleGroupposition”-pressrelease-04/04/2016 “SocieteGeneralereactionto“PANAMAPAPERS”-pressrelease-04/04/2016“FrenchbankchiefOUdeatomeetsenatorsoverPanamaPapers”-Reuters-12/04/2016 “BelgiumdeepensmoneylaunderingandtaxfraudprobeintoUBS”–FinancialTimes–26/02/2016 “HSBCfacesFrenchcriminaltaxprobe”–BBCNews–09/04/2015 “Openingthevaults:theuseoftaxhavensbyEurope’sbiggestbanks”–Oxfam/FairFinanceGuideInternational–

27/03/2017

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PreliminaryreportsonthePanamaPapersleakof4thApril2016,indicatedthatSociete Generale wasamongthe10banksthatrequestedthemostoffshorecompaniesforclients.

TheleakwasdubbedthePanamaPapersbytheInternationalConsortiumofInvestigativeJournalists(ICIJ),anon-profitgroupbasedintheUSthatoriginallypublishedthem.ThegroupsaidananonymoussourceprovidedinternaldocumentsfromthePanama-basedlawfirmMossackFonseca,oneoftheworld’sbiggestcreatorsofshellcompanies.

Thedatastretchesover40years-from1977totheendof2015,andincluded214,000offshoreentities.

Thereports,basedon11.5millionleakeddocuments,putSocieteGeneraleamongthetopbankscreatingshellcompaniesinPanamasincethelate1970s,withatotalof979createdbytheFrenchbank.

Taxpoliceraidedthebank’sofficesandthebank’sCEO,FrédéricOudéasummonedtomeetFinanceMinisterMichelSapin,afterthePanamaLeak.FrédéricOudéaandDidierValet,headofcorporateandinvestmentbanking,privatebankingandassetmanagement,alsometFrenchunionstoanswerquestionsaboutthePanamaPapers.

Onitswebsite,thebankreportedthat:

� Withintheframeworkofitsprivatebankingactivity,SocieteGeneraleprovidesbankingandfiduciaryservicestoasset-holdingcompaniesonbehalfofitsclients.Thisactivity,entirelymarginal,iscarriedoutinatransparentmanner,respectingtherulesinforceconcerningthefightagainstfraudandtaxevasion.Today,thenumberofactivestructurescreatedviathefirmMossackFonsecaforclientsamountstoafewdozen.Thesecompaniesaremanagedastotallytransparentstructures”.

� Withregardtothebankingactivitiescarriedoutbyitsclients,theGrouphashadaTaxCodeofConductinplacesince2010whichsetsoutaclearframeworkforrelationswithclientstoensurethatthehigheststandardsoftransparencyandtaxcomplianceareadheredto.ThebankhasthereforedecidedtocarryoutitsprivatebankingactivitiesexclusivelyinjurisdictionswhichhaveadoptedtheautomaticexchangeofinformationstandarddrawnupbytheOECD,knownastheCommonReportingStandard,whichdemonstratesthebank’sfirmintentionnottotakepartinoperationswhichaimtocontravenetaxlawsorregulations.Thestandardenablestaxauthoritiestobeawareofoverseasfinancialaccountsheldbytheirtaxpayers,whethertheseaccountsarehelddirectlyorviaoffshorewealthcompanies.

AccordingtoanewreportpublishedbyOxfamandtheFairFinanceGuideInternationalonMarch27th2017,20Europe’slargestbanksroutedEUR25billion–26%oftheirprofit-throughtaxhavensin2015.

Theresearch,madepossiblebynewEUtransparencyrulesthatrequireEuropeanbankstopublishinformationontheearningsonacountry-by-countrybasis,alsofoundthefollowing:

� In2015EuropeanbankspostedatleastEUR628millioninprofitsintaxhavenswheretheyemploynobody.

� LuxembourgandIrelandarethemostfavoredtaxhavens,accountingfor29%oftheprofitsbankspostedintaxhavensin2015.The20biggestbankspostedEUR4.9billionofprofitsinLuxembourgin2015–morethantheydidintheUK,SwedenandGermanycombined.

� EuropeanbankspaidnotaxonEUR383millionofprofittheypostedinseventaxhavensin2015.InIreland,Europeanbankspaidanactualtaxrateofnomorethan6percent–halfthestatutoryrate–withthreebanks(Barclays,RBSandCréditAgricole)payingnomorethan2percent.

� Banks’subsidiariesinlow-taxjurisdictionsaretwiceasprofitableasofficeselsewhereandemployeesarefourtimesmoreproductive,generatinganaverageprofitofEUR171,000perpersonannuallycomparedtoEUR45,000onaverage.

Someoftheworld’slargestcompanieshavebeencriticizedforfunnelingprofitsthroughplacessuchastheBritishterritoriesofBermuda,theCaymanIslandsandIreland,promptingpromisesofharshermeasuresfromgovernmentstoensuretheycollectmoretax.

“Governmentsmustchangetherulestopreventbanksandotherbigbusinessesusingtaxhavenstododgetaxesorhelptheirclientsdodgetaxes”,ManonAubry,Oxfam’sseniortaxjusticeadvocacyofficer.“Allcompaniesandindividualshavearesponsiblytopaytheirfairshareoftax.TaxdodgingdeprivescountriesthroughoutEuropeandthedevelopingworldofthemoneytheyneedtopayfordoctors,teachersandcareworkers”.

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Allegationsintheextractivesectors(Energy,Mining,ElectricandGasUtilities,OilandGasequipment),mainlyconcerntaxevasionschemes,taxfraudordisputesoverroyaltiespayments.

Examples of controversies1:

InAugust2016,London-basedInternationalTransportWorkersFederation(ITF)releasedareportshowingallegedsecretcorporatestructuresandaggressivetaxevasionschemesusedbyChevronandothermajorNorthSeaoilproducers.ITFreleaseditsreportnamed“OffshoreOil,OffshoreTax”accusingChevronofusingoff-gridschemesfortaxevasionpurposes.Inthe2016Budget,theUKChancellorannouncedmajornewtaxcutstothebenefitofNorthSeaoilproducers.ITFsaysthataChevronexecutivewasthehonorarytreasureroftheoilandgaslobbythatdemandedthesecuts.Ontopoffurtherreductionsintheoverallcorporatetaxrate,thePetroleumRevenueTaxwaseliminatedandthesupplementarychargeforoilcompanieswascutinhalf.

TheCompanydidnotreacttothisallegation.

On27thSeptember2016,Weatherford International agreedtopayaUSD140millionpenaltytosettlefraudulenttaxaccountingcharges.

AccordingtotheSecuritiesandExchangeCommission(SEC),thecompanyuseddeceptiveincometaxaccountingtoloweritstaxbill.ItlowereditsprovisionforincometaxesbyUSD100mtoUS154millioneachyearsoitsearningscouldbealignedwithearlierprojections.

JamesHudgins,Weatherford’svicepresidentoftax,andDarrylKitay,ataxmanager,alsoagreedtosettlechargesforUSD334,067andUSD30,000,respectively.Bothwerebarredfromauditingandperformingfinancialreportingonpubliccompaniesforfiveyears.

ThecompanywillpaytheSECinfourinstallmentsspreadoverthenext12months.

On5thOctober,2016,theHighCourtofN’Djamenain Chad ordered Esso,partofExxonMobil,andothercompaniesofaconsortiumitoperates,topayaUSD74billionfineinadisputeoverroyalties.ThedecisionfollowedacomplaintsubmittedbytheMinistryofFinance,whichclaimedthattheconsortium,whichalsoincludesPetronas(35%),andSocietedesHydrocarburesduTchad(25%),hadnotmetitstaxobligationsinthecountry.Thedisputeliesinthedifferencebetweentheamountofexporttaxespaidbythecompany,fixedat0.2%throughanagreementsignedwiththegovernmentin2009,andtheratefixedbylawat2%.TheUSD74billionfinenotablyinlcudesUSD819millioninoverdueroyalties.

ThenationalcompanySocietedesHydrocarburesduTchadhasboughtbackChevronsharesintheconsortiumandwillreportedlybearcostsrelatedtothefineinsteadofChevron.

EstimationsmadebythecustomsinthecountrypointoutUSD638.6millioninmissingprofitssince2009linkedtoExxonMobil’sexportstoCameroon.Thefineisconsideredthehighesteverimposedonanenergycompanyworldwide

1 ITFaccusesNorthSeaoilmajorsofsecretivetaxevasionschemes”-OffshoreEnergyToday-25/08/2016 “WeatherfordInternationaltopayUSD140millionforaccountingfraud”–Reuters–27/09/2016 “EssonhitwithfinefromChadfivetime’scountryGDP”–Bloomberg–07/10/2016

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1-Why do tax fairness and tax transparency matter?Taxplayacrucialroleindevelopmentandsocialjusticewithtaxrevenuesfinancingpublicservicesandinstitutions.Withtheserevenues,Statesareexpectedtograntcitizensaccesstoprimaryhealthcare,basiceducation,home,foodetc.inlinewithinternationalstandards.Theredistributionoftaxisanadditionalwaytoreduceinequalitiesandfightpoverty.

Intermsofgovernanceandaccountability,taxationis a mean for citizens to hold governments accountableforthewaytheyspendpublicrevenues.

Finally,taxescanalsobeawaytoensurethatsocialandorenvironmentalcostsandbenefitsofproductionorconsumptionofparticulargoodsarewellreflectedinthemarketprice.

Fromaneconomicperspective,asunderlinedbythe World Bank1,“theamountofthetaxcostforbusinessesmattersforinvestmentandgrowth.Wheretaxesarehigh,businessesaremoreinclinedtooptoutoftheformalsector.(…)Keepingtaxratesatareasonablelevelcanencouragethe development of the private sector and the formalizationofbusinesses.Thisisparticularlyimportantforsmallandmedium-sizeenterprises,whichcontributetogrowthandjobcreationbutdonotaddsignificantlytotaxrevenue(…).”

TheOECDisconcernedbystrategiesthatexploitgapsandmismatchesintaxrulestomakeprofits‘disappear’andbystrategiesthatshiftprofitstolocationswheretaxesarelow.Firstly,thesestrategiesdistortcompetition:businessesthatoperatecross-bordermayprofitfrombaseerosionprofitshiftingopportunities,givingthemacompetitive advantage over enterprises that operate atthedomesticlevel.Secondly,theymayleadtoinefficientallocationofresourcesbydistortinginvestmentdecisionstowardsactivitiesthathavelowerpre-taxratesofreturn,buthigherafter-taxreturns.Itisanissueoffairness:whentaxpayers(includingordinaryindividuals)seemultinationalcorporationslegallyavoidingincometax,itunderminesvoluntarycompliancebyalltaxpayers2.

2-ChallengesDespitethecrucialroleofcorporatetax,internationaltaxavoidanceandtaxevasionremainglobalandcriticalissues.AsmentionedinthelastOxfamreport13,taxcompetitionbetweencountriesisfierce,and“somecountries,consideredastaxhavens,donothesitatetoattractglobalcorporationsbyproposinglowtaxrates;offeringtaxloopholesandspecialincentives;providingfinancialsecrecytofacilitatetaxevasion;impedingscrutiny;orbeingdeliberatelylaxabouttaxenforcement”.

Inaddition,thereiscurrentlynoconsensusfromtheinternationalcommunitytoagreeonadefinitionofa‘taxhaven’;acommonlistofcountriesisthereforeyettobeestablished.Thissituationindirectlycontributestolegitimatejurisdictionsorterritoriespromotingharmfulcompetitionbyadoptinglegalorfiscalframeworksallowingnon-residentstominimisetheamountoftaxespaidwheretheyundertakesubstantialeconomicactivity.

3-Current trends and the lastest development on tax transparency: regulators and stakeholders perspectives

Evolution of the international normative frameworkAccording to the OECD4,annualrevenuelossduetobaseerosionandprofitshifting(BEPS),wasestimatedatUSD100to240billion.BEPSreferstotaxavoidancestrategiesthatexploitgapsandmismatchesintaxrulestoartificiallyshiftprofitstoloworno-taxlocations.WiththepoliticalsupportofG20leaders,theinternationalcommunityhastakenjointactiontoincreasetransparencyandpromoteinformationexchangeintaxmatters,addressingweaknessesoftheinternationaltaxsystemthatcreateopportunitiesforBEPS.TheimpactofBEPSondevelopingcountries,asapercentageoftaxrevenues,isestimatedtobeevenhigherthanindevelopedcountries.Basedonanactionplansetin2013,theOECDandG20agreedinNovember2015onapackageof15actions5.

Corporate tax and its implications

1 http://www.doingbusiness.org/data/exploretopics/paying-taxes/why-matters2 http://www.oecd.org/ctp/beps-frequentlyaskedquestions.htm3 Taxbattles:thedangerousglobalracetothebottomoncorporatetax’–Oxfam–12December2016,p.104 http://www.oecd.org/tax/beps/background-brief-inclusive-framework-for-beps-implementation.pdf5 Formoredetails,seehttp://www.oecd.org/tax/beps/beps-actions.htm+Annexe3

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On7thJune2017,representativesof68countriessignedthemultilateralconventiontoimplementtaxtreatyrelatedmeasurespreventingBaseErosionandProfitShifting1,thefirstmultilateralagreementofitskindtoamendmultipletaxtreatieswithchangesintendedtoreducedoubletaxationandalsonontaxationthroughtaxevasionoravoidancebymultinationalenterprises.Mandatoryandbindingdisputeresolutionmechanismsaretobeextendedtoemployersandindividualsinsignatorycountriesunderthetreaty.Employersmaypresentdouble-taxationdisputestoapplicableauthoritiesthroughamutualagreementprocedurewithinthreeyearsfromthefirstnotificationoftheactionresultingintaxationirrespectiveoftheremediesprovidedbydomesticlaw.2ExpectedsignatoriesincludemostOECDandG-20countries,withtheexceptionoftheUnitedStates.

Onthe4thJuly2017,theEUParliamentvotednewrulestoobligemultinationalswithaturnoverofatleastEUR750millionstopublishdetailsoftheiractivitiesonacountry-by-countrybasis,evenincountriesoutsidetheEU3.ThesenewrulesfollowtheadoptionofCouncilDirective(EU)2016/881on25thMay2016,whichprovidesforcountry-by-countryreporting(CBCR)totaxadministrations,andamendstheAccountingDirective2013/34providingforpubliccountry-bycountryreporting.

AspartoftheEUCommission’sAnti-Taxavoidancepackage44,inJune2016,theEUCouncilalsoadoptedanAnti-TaxAvoidanceDirective(ATAD)5 layingdownrulesagainsttaxavoidancepracticesthatdirectlyaffectthefunctioningoftheinternalmarket.ThisDirectivehasbeencompletedbyanagreementonrulestostopcompaniesfromescapingtaxbyexploitingthedifferencesbetweenMemberStates’andnon-EUcountries’taxsystems(“hybridmismatches”)onMay29th20176.ThenewrulesaresettogointoeffectinJanuary2020.

SinceJanuary2017,MemberStateshavebeenobligedtoautomaticallyexchangeinformationonfinancialaccounts,asanimportantstepagainstoffshoretaxevasion.FromJulythisyear,similartransparencyruleswillapplyfortaxrulings,whilemultinationalswillhavetoprovidecountry-by-countryreportstotaxauthoritiesbytheendoftheyear.

IntheUnitedStates,on29thJune2016,theU.STreasuryDepartmentandInternalRevenueService(IRS)releasedfinalcountry-by-countryregulationsmodeledontheOECDrecommendationsunderAction13oftheBEPSproject.UltimateparententitiesofaU.SmultinationalgroupwithannualrevenueofUSD850millionormoremustfileForm8975,“Country-by-CountryReport,”containinginformation,onacountry-by-countrybasis,relatedtotheU.SMNEgroup’sincomeandtaxespaid,togetherwithspecificindicatorsofeconomicactivitywithintheU.SMNEgroup.

1 “OECDMovestoLimitTaxAvoidancebyMultinationals”WallStressJournal-07/06/2017 “SignatoriespartiestothemultilateralconventiontoimplementTaxTreatyrelatedmeasurestopreventbaseerosionand

profitshifting,inhttp://www.oecd.org/tax/treaties/beps-mli-signatories-and-parties.pdf http://www.oecd.org/tax/treaties/multilateral-convention-to-implement-tax-treaty-related-measures-to-prevent-beps.htm2 “OECDCountriesSignMultilateralTreatyonDoubleTaxation”–Bloomberg-07/06/20173 MEPspassnewrulestotacklemultinationals’taxavoidance”–Euractiv-04/07/2017-https://www.euractiv.com/section/

economy-jobs/news/eu-lawmakers-pass-new-rules-to-tackle-multinationals-tax-avoidance/4 http://ec.europa.eu/taxation_customs/business/company-tax/tax-transparency-package_en5 Directive(EU)2016/1164-http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32016L1164&from=EN6 http://europa.eu/rapid/press-release_IP-17-1433_en.htm

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Stakeholders’ diligence and concernsInadditiontomediascrutiny,numerousreportshavebeenpublishedbyNGOsandcivilsocietyorganisations1inrecentyearsoncompanies’taxavoidance strategies and on the importance of stoppingtaxavoidance,andsupportdevelopment.

StakeholdersgenerallywelcometheOECDandtheEU’ssupportforglobaltaxtransparencyandeffortstoputanendtothesecrecysurroundingmultinationalcompanies’activities,structuresandtaxpayments,eventhoughconcernscontinuetoberaisedandfurtherworkneedstobedone.

Forinstance,Oxfam2callsupongovernmentstoadopt“anewgenerationofinternationaltaxreforms”,tocreate“aglobalbodytoleadandcoordinateinternationaltaxcooperationthatincludesallcountries”andtoestablish“aclearlistofwhicharetheworsttaxhavensbasedoncriteriaincludingtransparencymeasures,verylowtaxratesandtheexistenceofharmfulpracticesgrantingsubstantialreductions”.Italsopleadsfortheadoptionofstrongdefensivemeasures,includingsanctionsagainstlistedcorporatetaxhaventolimitBEPS.Finally,Oxfam,requestsgovernmentsandinternationalinstitutionstoworktogethertosetfairandprogressivecorporatetaxratesandensurethatallcountriesareabletodelivertheircommitmentundertheSustainableDevelopmentGoals(SDGs),reducetheirdependencyonregressivetaxation,andeffectivelysetpublicspendingtoreducetheinequalitygap.

Transparency International also reacted to the country-by-countryrulesvotedbytheEUParliamentinJuly2017,regrettingexceptionsandloopholesintroducedinthelastversionadopted3.Inparticular,TransparencyInternationalworriedthata‘getoutclause’introducedbyMembersoftheEuropeanParliamentduringthevoteinCommitteewouldallowthemtoavoiddisclosingcrucialinformationtheyconsider “commercially sensitive”4.

1 TaxJusticeNetwork,theInternationalCenterforTaxandDevelopment,CCFD,ActionAid,ChristianAid,Eurodad,Oxfam,TransparencyInternational,Eurodad

http://www.eurodad.org/files/pdf/5630c81b03d89.pdf2 Taxbattles:thedangerousglobalracetothebottomoncorporatetax’–Oxfam–12December2016,p.103 https://transparency.eu/cbcr-ep-vote/+http://transparency.eu/european-parliament-plenary-vote-tax-transparency/4 http://www.diplomaticintelligence.eu/european-union-news/2545-european-parliament-votes-for-corporate-get-out-clause-

on-tax-transparency

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Conclusion:

The fact that only 2.5% of companies provide comprehensive tax disclosure reports, and that these companies mainly operate in sectors that are subject to more stringent regulatory frameworks, raises concern. These companies are also the most subject to controversies.

Preventing tax avoidance and reporting transparently on tax are a fiduciary duty for businesses, which have to exercise their social responsibility on these sensitive issues. It is a part of companies’ duty of vigilance to prevent tax avoidance, as well as to guarantee fair tax payment in countries where they operate. Corporate transparency is expected not only on tax payments, but also on the strategic motives behind local operations or the location of assets in offshore financial centers and secret jurisdictions.

Responsibility for ensuring tax transparency and preventing tax avoidance lies with executives and directors, and any assurances from external auditors should not prevent senior management from proactively addressing tax issues. Both should be integrated into risk management frameworks and corporate responsibility processes.

Tax avoidance and lack of transparency represent risks for companies, investors, and communities, but also for social and economic public order, at global, regional and national levels. Such practices can affect corporate reputation and raise legal risks, illustrated by the scandals and legal disputes that have emerged over recent years. These events also reveal increasing scrutiny from civil society, the media and regulators, as well as a desire to end damaging and unfair practices that hamper local governments, distort competition, and hinder sustainable development. Tax avoidance also reinforces inequalities among countries and citizens.

In coming years and in line with the OECD Base Erosion Profit Shifting project, regulations will demand transparency from large corporations on the taxes they pay. Anticipating these behaviour changes can be an asset for companies. However, as noted by civil society and different stakeholders, there is much work to be done to effectively tackle tax avoidance, harmful tax practices, and to change current controversial behaviours. The participation and cooperation of all stakeholders, including companies, states and international organisations will be necessary to change such practices.

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Annexe 1: Vigeo Eiris Methodology

Vigeo Eiris methodology

VigeoEiris’exclusivemethodologyEQUITICS©measurestherelevanceofcompaniesandorganisations’commitments,theefficiencyoftheirmanagerialsystems,theirabilitytomanagerisks,andtheirperformanceonallenvironmental,governance,socialandsocietalresponsibilityfactors.

Theagency’sframeworkiscomposedof38sustainabilitycriteriabasedoninternationalstandards,whicharegroupedintosixdomainsofanalysis:BusinessBehaviour,CommunityInvolvement,Environment,Governance,HumanResources,andHumanRights.

TaxtransparencyisassessedbyVigeoEirisintheCommunityInvolvementdomainunderthesustainabilitydriver“Contributionto social and economic development”.

Our questioning on companies’ reporting on taxes

Ourquestioningisbasedonthemost advanced international standards,suchasAction13ofthe OECD Base Erosion Shifting Project(BEPS)andregionalregulations,suchastheEUAnti-TaxAvoidanceDirective(2016),andEuropeanregulationsonpublictaxreportingforextractive

companiesandfinancialinstitutions.

Companiesarethusexpectedtoprovide,bycountryorareaofactivity,detailedinformationontheirtaxpaymentandtheiroperationalactivities.Theymustalsojustifytheirphysicalpresence or the presence of their assetsintaxhavensoroffshorecenters.

Weassesscompanies’levelofreporting on a scale from 1 to 4:

� Ascoreof1(lowest)isgrantedto companies that either do not reportontheirtaxpaymentsatall,oronlyreportongrosstaxespaidwithnobreakdownbyregionorcountry.

� Ascoreof2isgrantedforpartialcorporatetaxreportingwithageographicalbreakdownofactivities,butnoreportingonoperationalfigures

� Ascoreof3isgivenwhencompany’taxreportsincludeageographicalbreakdownandsomeoperationalfigures.

� Ascorea4isgivenwhentaxreportingincludesageographicalbreakdown,operationalfigures,andspecificsontheactualrateoftaxpaid,aswellasanexplanationwhenthisratediffersfromthestatutoryrate.

We also take into consideration stakeholders’feedbackandthecompany’sresponsivenesstocontroversies.

To determine the level of severity ofacontroversy,ourassessmenttakesintoaccount,theallegedfacts,thescaleofimpactonstakeholders,thelevelofmanagementinvolved,andthereputational,financial,legalandoperational implications for the company.

Ourinternalqualityprocessesrequiredataandinformationcollectedtobeextractedfrompubliclyavailablesourcesandtocomefromreliable,identifiedandmultiplestakeholders.

Universeofthestudy:

� 1139companiesheadquartersinEurope,NorthAmerica,AsiaPacificandEmergingmarkets

� 29sectors

� 57countries

� Assessmentperiod:January2016–February2017

List of countries where companies under review are listed:

AustraliaAustriaBelgiumBermudaBrazilCanadaChileChinaColombiaCzechRepublicDenmarkFinlandFranceGermanyGreeceHongKongHungary

IndiaIndonesiaIrelandItalyJapanKoreaLuxembourgMalaysiaMexicoMoroccoNetherlandsNewZealandNorwayPeruPhilippinesPolandPortugal

RussiaSingaporeSouthKoreaSouth-AfricaSpainSwedenSwitzerlandTaiwanThailandThe NetherlandsTurkeyUnitedArabEmiratesUnitedKingdomUnited States of America

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List of sectors where companies under review belong to:

AerospaceAutomobilesBanksBeverageBuildingMaterialsChemicalsElectric&GasUtilitiesElectricComponents&EquipmentEnergyFinancial Services - GeneralFinancial Services - Real Estate

FoodForestProducts&PaperHeavyConstructionHotel,LeisureGoods&ServicesIndustrialGoods&ServicesInsuranceMechanicalComponents&EquipmentMining&MetalsOilEquipment&ServicesPharmaceuticals&Biotechnology

Software&ITServicesSpecialised RetailSpecificPurposeBanks&AgenciesSupermarketsTechnology-HardwareTobaccoTransport&LogisticsTravel&Tourism

List of companies under review in our study:

2IReteGasSpa3iGroupPLC3MCompanyA2AAalbertsAberdeenAssetManagementPLCAblynxABNAMROGroupAbuDhabiCommercialBankAcciona SAAceaACORDATHERAPEUTICSACSActelionAcuityBrandsAdaniEnterprisesLtd.Adelaide BrightonAdvantageOil&GasAeconGroupIncAegeanMarinePetroleumNetworkAFFILIATEDMANAGERSAFPINTEGRA(Peru)AfriquiaGazAGCO CorporationAgnico-EagleMinesLtd.AgriumAholdAir CanadaAirFrance-KLMAirProducts&ChemicalsAixtronAjinomotoCo.Inc.AKSteelHoldingCorp.Alacer GoldAlamos GoldALASKAAIRGROUPAlbemarleCorpAlbertsonsAlcoaInc.ALEXANDRIAREALESTATEAlfa LavalAlfresaHoldingsAlgonquinPower&UtilitiesAlibabaGroupHoldingLtdAlimentationCouche-TardInc.ALIORBANKAlleghenyTechnologiesInc.AllianceFinancialGroupAllianderN.V.AlnylamPharmaceuticals

Alon USA EnergyAlstomAlstriaOfficeREITAluminaAmagPharmaceuticalsAmcorAMERCOAmericanAirlinesGroupInc.AmericanAxle&ManufacturingHoldingsIncAMERICANCAPITALAGENCYAmetekAmphenolAMSAGAmtrustFinancialServicesAmundiAnadarkoPetroleumCorp.Andritz AGANHEUSER-BUSCHINBEVANIPHARMACEUTICALSAnimaHoldingAnnalyCapitalManagementInc.Ansaldo STSANTERO RESOURCESApacheCorp.AramarkArcResourcesLtdArchCoalInc.Archer-Daniels-MidlandCo.ArdaghPackagingArgenta BankAroundTownPropertyHoldingsPLCAryztaAsahi GlassAshlandGlobalHoldingsIncAshmoreGroupPLCASHTEADGRPASMInternationalNVASMLHLDGASPENINSURANCEHOLDINGSAssaAbloyAssociated British FoodsAstellasPharmaAstraZenecaATCOAtlantaATLAS AIR WORLDWIDE HOLDINGSAtlas Copco AAtmos Energy

ATSAutomationToolingSystemsAttijariwafaBankAucklandInternationalAirportAurizonHoldingsLtdAurobindoPharmaAustraliaPacificAirports(Melbourne)AutoHallAutoNejmaAUTOLIVAvalonbayCommunitiesInc.AvangridAvisBudgetGroupInc.AvistaAxaltaCoatingAxisBankAZIMUTHLDGB2GoldBacardiBACKUSYJOHNSTONBadger DaylightingBaidu.comIncBakerHughesInc.BalfourBeattyBAMGROEPBancaMonteDeiPaschiDiSienaBancoBilbaoVizcayaArgentariaBanco DaviviendaBanco de Credito e InversionesBanco Do Estado do Rio Grande doSulBANCO NACIONAL DE DESENVOLVIMENTOECONOMICOESOC.Banco SantanderBank Danamon IndonesiaBankHandlowywWarszawieBankMillenniumBank of AmericaBankofAyudhyaBank of BarodaBankofMontrealBankofNewYorkMellonCorp.BankofthePhilippineIslandsBANKZACHODNIWBKBANKIABanqueFederativeduCreditMutuelBarclaysBarrickGoldCorp.BarryCallebaut

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BayerBAYTEXENERGYCORPBB BiotechBB&TCorp.BBAAviationPlcBCPBDOUnibankBekaertBeldenBharatPetroleumBilfingerSEBirchcliff EnergyBlackHillsCorporationBlackberryBlackRockInc.BluescopeSteelBMCEBankofAfricaBMCIBNKFinancialGroupBNPParibasBoardwalkPipelinePartnersBoeingBombardierBonavista Energy CorporationBonterra EnergyBookerGroupplcBoralBorgWarnerInc.Boskalis WestminsterBostonPropertiesInc.BouyguesBoyd GamingBPBrasseriesduMarocBremboBrinker InternationalBRITVICBRIXMORPROPERTYGROUPBrookfieldAssetManagementInc.Brown&BrownBrown-FormanBRPBrusselsAirportHoldingNV/SABSHHausgeräteGmbHBTGBuckeyePartnersBungeLtd.BurlingtonNorthernSantaFeBUZZIUNICEMC&CGROUPCAImmobilienAnlagenAGCabotOil&GasCorp.CAEIndustriesCAIRN ENERGYCairn IndiaCaixaBankCajaruraldeNavarraCalampCalbeeCaliforniaResourcesCorporationCaltexAustraliaCALUMETSPECIALTYPRODUCTSCamdenPropertyTrustCamecoCorp.CampbellSoupCo.CanadianEnergyServices&TechnologyCanadian Imperial Bank of

CommerceCanadianNaturalResourcesLtd.CanforCapitalPowerCargillCARGOTECCORPORATIONCarillionPLCCarlsberg‘B’CarlsonWagonlitBVCarnival(UK)Carnival(USA)CarrefourCaterpillarCBREGP.CCL INDUSTRIESCDMCDWCelaneseCelesticaCEMENTOSPACASMAYOCenovusEnergyInc.Centerra GoldCentrale LaitièreCentricaCEZCFIndustriesHoldingsChangHwaCommercialBankCharlesSchwabCorp.ChemoursChemtradeLogisticsIncomeFundChesapeakeEnergyCorp.ChevronCorp.ChinaMerchantsBankChinaStateShipbuildingChipotleMexicanGrillChiyodaChongqingRuralCommercialBankChrHansenHoldingChugaiPharmaceuticalCIHCimarexEnergyCoCinemarkCineplexCiplaCITGroupInc.CitizensFinancialGroup,Inc.CityDevelopmentsLtd.CKHutchisonHoldingsClaire’sStoresClecoCliffsNaturalResourcesInc.CloseBrothersGRPCLOVISONCOLOGYCNHIndustrialNVCNOOCCOBALTINTL.ENERGYCoca-Cola BottlingCoca-ColaCo.Coca-ColaEuropeanPartnersCOCA-COLAHBCCofcoColony NorthStarCOLONYSTARWOODHOMESColruytGroupComericaCOMMERCIALMETALSCOCommerzbankCommScope

COMMUNICATIONSSALES&LEASINGConAgraFoodsInc.CONCHORESOURCESConcordia International CorpConocoPhillipsConsolEnergyInc.ConstellationBrandsInc.ClAContinentalResourcesConwertImmobilienCorbionCORPORACIONACEROSAREQUIPACosumarCott CorporationCovantaCovestro AGCowenGroupCRANECredit AgricoleCreditSuisseGroupCrescentPointEnergyCorp.Crescent Real EstateCrewEnergyCRHplcCSLCSPCPharmaceuticalGroupCSR(AUS)CumminsDAA plcDaido SteelDaiichi SankyoDainipponSumitomoPharmaDanaHoldingCorpDanaherDanfossDanoneDanske BankDardenRestaurantsDassaultAviationDBVTechnologiesSADe’LonghiDeere&CompanyDELPHIAUTOMOTIVEDeltaAirLinesInc.DeltaHoldingDenburyResourcesInc.DetourGoldDeutscheEuroshopDeutscheLufthansaAGDEVELOPMENTBANKOFJAPANDevonEnergyCorp.DGBFinancialGroupDIADiageoDIALOGGROUPDIALOGSEMICONDUCTORD’IeterenDigitalRealtyTrustInc.DiswayDivi’sLaboratoriesDNBDominion Diamond CorporationDOMINO’SPIZZAENTS.DominosPizzaGroupDOMTARCORPORATIONDONG Energydorma+kabaHoldingAG

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DoverDowaHoldingsDrPepperSnappleGroupInc.DraxGroupDS SmithDubaiIslamicBankDuerrAGDukeRealtyCorp.E.onE.SunFinancialHoldingEANDISEastmanChemicalCo.easyJetEatonEbaraEbroFoodsEcolabInc.EcopetrolS.A.EDFEDPRENOVAVEISEDP-EnergiasdePortugalEITowersEiffageEika Boligkreditt ASEisaiEldoradoGoldCorp.ElectricitySupplyBoardElectroluxBELECTRONICSFORIMAGINGElement Financial CorpEleniaEliaEmeraEmerson ElectricEmpire CoEnagasEnbridgeEnergyPartnersEnbridgeIncomeFundHoldingsEnBW Energie Baden-WürttembergEnCanaCorp.EndesaEnelEnerflexEnergenCorp.EnerplusCorporationEnexisEngieEnnaklAutomobilesEnsign Energy ServicesEntegaEnterprise INNSEOGResourcesInc.EPEnergyEqdomEQTCorp.EQUITYCOMMONWEALTHEquityResidentialERGEricssonErsteGroupBankEssentra plcESSEXPROPERTYTRUSTEssoEsterline TechnologiesEurazeoEurogridEuropcarGroupeSAEVN

EWEExport-ImportBankofKoreaEXTRASPACESTORAGEEZCORPFederalHomeLoanBanksFederalRealtyInvestmentTrustFerrariFerreycorpFerrovialFFGroupFifth Third BancorpFingerprint CardsFingridFinning InternationalFirst Capital RealtyFirstQuantumMineralsLtd.FirstRepublicBankFirst SolarFletcherBuildingFLIR SystemsFlowersFoodsFLSMIDTH&COMPANYFMCCorp.FomentodeConstruccionesyContratasForest City EnterprisesFORESTARGROUPFortescueMetalsGroupFortumFortuneBrandsHome&SecurityFranklinResourcesInc.FultonFinancialFurukawaElectricGalapagosGenomicsNVGalpEnergiaSGPSS/AGAMGamingandLeisurePropertiesGasNaturalSdgGasNetworksIrelandGEAGroupAGGeberitAGReg.GemaltoNVGeneral DynamicsGeneral ElectricGeneral Electric Capital CorporationGeneralGrowthPropertiesInc.GeneralMillsInc.GENOMMALABINTERNACIONALGenteraGentingSingaporePLCGenuinePartsCo.GenworthFinancialInc.ClAGEORGFISCHERGerryWeberInternationalGibsonEnergyGIMVGlanbiaGlaxoSmithklineGOGOGoldcorpInc.GoldenAgri-ResourcesLtd.GoldmanSachsGroupInc.GoodyearTire&RubberCo.GRAINCORPGran Tierra EnergyGRANDVISIONNVGreatPlainsEnergy

GreenPlainsGreenbrierCompaniesGrifolsGroupeAuchanGroupeBPCEGroupeCasinoGroupeSebGrupaLotosGrupoLalaGruppoCampariGSHoldingsGSYuasaH&RREITHalmaHanmiPharmHARGREAVESLANSDOWNHarley-DavidsonInc.HARMONICHCPInc.HDSupplyHDFCBankHEIDELBERGCEMENTAGHeinekenHldgN.V.HeinekenN.V.HelicalBarHellaKGaAHueck&CoHellenicPetroleumHendersonGrpHeraS.p.A.HERBALIFEHersheyCo.HertzGlobalHoldingsInc.HessCorp.HewlettPackardEnterpriseHEXAGONBHexcelHexionHiberniaREITPLCHikmaPharmaceuticalsHiroseElectricHisamitsuPharmaceuticalHitachiConstructionMachineryHitachiMetalsHOCHTIEFHOLLYFRONTIERHomeCapitalGroupHoneywellInternationalHongLeongBankHongLeongFinancialGroupHORIZONPHARMAHostHotels&ResortsInc.HSBCHoldingsHubbellHuntingtonBancsharesHuntingtonIngallsIndustriesHuskyEnergyInc.HutchisonPortHoldingsTrustHYATTHOTELSIAGIAMGOLDIberdrolaICAGruppenICAHNENTERPRISESLPIcapPLCIdacorpIdemitsuKosanIDEXIGMFinancialInc.IHIcorporation

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Illinois Tool WorksIlukaResourcesIma SpaIMCDGroupIMIIMMUNOGENImperialOilLtd.IndiviorPLCIndusHoldingIndustrialBankofKoreaIndustrivardenAInfineonTechnologiesAGINFINERAInfinityProperty&CasualtyINGGroupIngenicoIngersoll-RandINGREDIONInnergexRenewableEnergyInpexINTEGRATEDDEVICETECHNOLOGYINTERCEPTPHARMAIntermediateCapitalGRPInternationalFlavors&FragrancesInterpumpGroupIntesa SanpaoloInvescoLtd.InvestecINVESTMENTABKINNEVIKBInvestor BInwitIrenIrish ContinentalIRONWOOD PHARMACEUTICALSIsoluxCorsaniStarInc.ItochuJSainsburyplc.J.C.PenneyCoJ.M.SmuckerCo.JamesHardieIndustriesJapanAirportTerminalCo.Ltd.JapanPetroleumExplorationJapanPostHoldingsCoLtdJapanTobaccoInc.JardineMathesonJD.comJeanCoutuGroupJerónimoMartinsJFEHoldingsJGCJohnsonControlsInc.Jones Lang LasalleJungheinrichJUPITERFUNDMANAGEMENTJustEnergyGroupJXHoldingsKalbeFarmaKamigumiCo.Ltd.KawasakiHeavyIndustriesKawasakiKisenKaishaLtd.KBCKeihanHoldingsCo.Ltd.KelloggCo.KeltExplorationKeppelCorporationKerryGroup

KeskoKewpieCorpKeyCorpKikkomanCorp.KimcoRealtyCorp.KindenKINGSPANGRPKinrossGoldCorp.KionGroupGmbHKloeckner&CoSEKobayashiPharmaceuticalKobeSteelKoitoManufacturingKomatsuKommunalkreditAustriaAGKoneOYJBKonecranesOyjKraftHeinzCompanyKrogerCo.KronesAGKrungThaiBankKubotaKuritaWaterIndustriesKyowaHakkoKirinKyushuFinancialGroupL3 TechnologiesLabelVieLaredoPetroleumLearCorp.LeidosHoldingsLexmarkInternationalLibertyPropertyTrustLICHousingFinanceLinamarLindt&SpruengliLineaGroupHoldingSpaLinn Energy LLCLisiLIVENATIONENTERTAINMENTLixilGroupLKQLloydsBankingGroupLoblawCos.Ltd.LockheedMartinLonzaLubrizolLuchthavenSchipholN.V.LukoilLundinMiningLUNDINPETROLEUMLupinLuyePharmaGroupLYONDELLBASELL INDUSTRIESM&TBankMacerichCo.MACQUARIEINFRASTRUCTUREMadrilenaReddeGasMagnaInternationalInc.ClAMANGRPManitowocMapleLeafFoodsIncMarathonOilCorp.MARATHONPETROLEUMMarineHarvestMarriottInternationalMarsaMarocMartinMariettaMaterialsMartinreaInternationalIncMarubeni

MaruichiSteelTubeMascoMAURELETPROMMBankMcCormick&CoMcDonald’sMeadJohnsonNutritionCo.MEDICINESCOMPANYMediolanumMEGENERGYMeijiHoldingsCo.Ltd.MeliáHotelsInternationalMELROSEINDUSTRIESMerckMeritorInc.MERLINPROPERTIESSOCIMIMERRIMACKPHARMACEUTICALMETROAGMetroInc.ClAMetropolitanBank&TrustMetsoCorporationMettler-ToledoInternationalMichaelsFinCoHLDGMID-AMERICANAPPARTMENTCOMMUNITIESMidamericanEnergyMitelNetworksMitsubishiMitsubishiHeavyIndustriesMitsubishiLogisticsCorp.MitsubishiMaterialsMitsubishiTanabePharmaMitsuiO.S.K.LinesLtd.Mitsui&CoMolsonCoorsBrewingCo.ClBMomentivePerformanceMaterialsMONDELEZMonsantoCo.MONSTERBEVERAGEMorganStanleyMorphosysMorrisonSupermarketsplcMosaicCo.MurphyOilCorp.National Bank of CanadaNational GridNationalRuralUtilitiesCooperative FinanceNationstarMortgageHoldingsNatixisNavigatorsGroupNavistar InternationalNCC BNederlandseGasunieNeopostNesteNestléNetease.comNetworkRailNEVRONevsunResourcesNewFlyerIndustriesNewYorkCommunityBancorpInc.NewcrestMiningNewfieldExplorationCo.NewmontMiningCorp.NEXITYNHFoodsLtd.

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NHHotelGroupNibeIndustrierNichireiCorp.Nippon Electric GlassNipponExpressCo.Ltd.Nippon Sheet GlassNipponSteel&SumitomoMetalCorporationNipponYusenK.K.NisshinSeifunGroupInc.NissinFoodsHoldingsCo.Ltd.NobleEnergy,Inc.NOKNokia OYJNordeaNordexAGNormaGroupSENorthernTrustCorp.NorthlandPowerNorthropGrummanNorthWestern CorporationNova Chemicals CorporationNovagoldResourcesNovartisNovo NordiskNovozymesNTNNucorCorp.NuvistaEnergyNVEnergyNXPSemiconductorNVOASISPETROLEUMINCOBRASCONHUARTELAINOC OerlikonOcadoOccidentalPetroleumCorp.OglethorpePowerOGXPetroleoeGasParticipacoesOil SearchOlamInternationalLtd.OmronOmv AGONE GasOnoPharmaceuticalOPHIRENERGYPLCOrientalLandCo.Ltd.OrionOrklaOsisko Gold RoyaltiesOtsukaHoldingsOulmesOZMineralsPaccarInc.PacificExploration&ProductionCorp.PacificorpPackagingCorporationofAmericaPanAmericanSilverParexResourcesParkerHannifinParqueAraucoPartnersGroupHoldingAGPasonSystemsPatriziaImmobilienPatternEnergyGroupPeabodyEnergyCorp.People’sUnitedFinancialInc.PepsiCoInc.PernodRicard

PetroChinaPeytoExploration&DevelopmentCorp.PfeifferVacuumTechnologyPhilipsN.V.PHILLIPS66Pierre&VacancesCenterParcsPioneerNaturalResourcesCo.PiramalEnterprisesPitneyBowesPlainsAllAmericanPipelinePlatformSpecialtyProductsPNCFinancialServicesGroupInc.POLARISINDS.PolskiKoncernNaftowyORLENPolskieGornictwoNaftoweiGazownictwoPortlandGeneralElectricPostHoldingsInc.PosteItalianeSpAPotashCorp.ofSaskatchewanInc.PPGIndustriesInc.PraxairInc.PrecisionCastpartsPrecisionDrillingCorporationPremierOilPremiumBrandsHoldingsPretiumResourcesPricelineGroupInc.PrimericaPROLOGISINC.ProMeticLifeSciencesIncProspectCapitalPROTECCIÓNPublicPowerCorpPublicStorageInc.PUMAQEPRESOURCESQuantaServicesRABOBANKRagingRiverExplorationRallyeRangeResourcesCorp.RATIONAL(XET)RATPRaytheonRealogyCorp.REALTYINCOMERed Electrica CorporaciónRedes Energeticas Nacionais SGPSSARedexisGasSARedwoodTrustRegalEntertainmentGroupRegencyCentersCorp.RegionsFinancialCorp.REINSURANCEGROUPOFAMERICARelianceSteel&AluminiumRémyCointreauRenaissanceReRepsolRésidencesDarSaadaRestaurantBrandsInternationalReynoldsGroupRHBBankRichter GedeonRIOCANREIT.TST.

Rite Aid CorpRocheRockwellAutomationRockwellCollinsRotorkPLCRoyal Bank of CanadaRoyalCaribbeanCruisesROYALDUTCHSHELLARPCGroupPlcRPMINTERNATIONALRusselMetalsRWE AGRyanairRyder SystemSaabABSacyr-VallehermosoSaint-GobainSalafinSalvatore Ferragamo Italia SpASandvikSanofiSantenPharmaceuticalSantosSanwaHoldingsSaputoIncSASSATSSchaefflerSchindlerPSchrodersSCINOPHARMTAIWANScotiabankSEACORHoldingsSecureEnergyServicesSeinoHoldingsCo.Ltd.SemafoSembCorpIndustriesSembCorpMarineSemiconductorManufacturingInternationalSensataTechnologiesHoldingSeven Generations EnergyShanghaiFosunPharmaShanghaiPharmaceuticalsHoldingShangri-LaAsiaLtd.ShawCorSherwin-WilliamsCo.ShimadzuShionogi&Co.ShireShowaShellSekiyuK.K.SignatureBankSihuanPharmaceuticalHoldingsGroupSIKASilverStandardResourcesSimonPropertyGroupInc.SimsMetalManagementSingapore Technologies EngineeringLtd.SinoBiopharmaceuticalSinopharmGroupSkandinaviska Enskilda BankenSkanska BSKFSKYCITYEntertainmentGroupLimitedSLGreenRealtyCorp.

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SLMCorp.Smart REITSmith(WH)SmithsGroupPLCSnamSNCFSNCFRéseauSNC-LavalinSociete GeneraleSofinaSoitecSojitzSonaeSONOCOPRODUCTSSothemaSouth32SouthwestAirlinesCo.SouthwestGasSouthwesternEnergyCo.Sparebank1SMNSPECTRUMBRANDSINCSPIESPIRAX-SARCOSpireSpirit AerosystemsSpondaOyjSSEStada ArzneimittelStagecoachGroupplcStandard CharteredStandardIndustriesStanley ElectricStarEntertainmentGroupLimitedStarbucksStatkraftStatoil ASASteelDynamicsInc.SteinhoffInternationalHoldingsLtd.Stella-JonesSTILLWATERMININGSTMicroelectronicsSuedzuckerSumitomoCorporationSumitomoElectricIndustriesSumitomoHeavyIndustriesSumitomoMetalMiningSumitomoOsakaCementSuncorEnergyInc.SunocoLogisticsPartnersSunpowerSunTrustBanksInc.SupervaluInc.SurgeEnergySuzukenSvenskaHandelsbankenSwedbankSWEDISHORPHANBIOVITRUMSWIFT ENERGY COSwirePacificSydneyAirportHoldingsLtdSyscoT.RowePriceGroupInc.TAGImmobilienAGTaiheiyo CementTaishinFinancialHoldingsTaishoPharmaceuticalHoldingsTaiwanBusinessBankTakedaPharmaceutical

Tarkett SATate&LyleTCPipeLinesTDKTE ConnectivityTeckResourcesLimitedTeco EnergyTennesseeValleyAuthorityTennetTernaTescoTesoroCorp.TessenderloTextronTFI InternationalThai OilTHKThomasCookGroupTimkenTLGImmobilienAGTMBBANKTod’sTomra Systems ASATORCOil&GasToromontIndustriesToronto-Dominion BankTotalMarocTotoTOURMALINEOILToyoSeikanGroupHoldingsToyoSuisanKaishaLtd.ToyotaTsushoToys R UsTransAlta CorporationTransAltaRenewablesTransDigmGroupTransurbanGroupTravisPerkinsTrelleborgBTriconCapitalGroupTrina SolarTri-StateGeneration&Transmission AssociationTsumura&Co.TTMTechnologiesTUI AGTULLOW OILTurkiyeVakiflarBankasiTurquoiseHillResourcesTVOPowerCoTysonFoodsInc.ClAU.S.BancorpUBSUCBUNDERARMOURUniCreditUnileverUnilever nvUnimerUni-SelectUnitedContinentalHoldingsInc.UnitedDominionRealtyTrustUnitedStatesSteelCorp.United TechnologiesUnitedTherapeuticsUSGUshioValeroEnergyCorp.

ValmontIndustriesVandeVeldeN.V.VASTNEDRETAILVattenfallABVentasInc.VerbundAGVereitInc.VeresenVermilionEnergyInc.VIAVISOLUTIONSVicatVierGasTransportGmbhVINCIVINEDOSEMILIANAViridianGroupViscofanVNESHECONOMBANKVornadoRealtyTrustVulcanMaterialsW R GRACEWABTECWal-MartStoresInc.WAREHOUSEDEPAUWWARTSILAWeirGRPWellsFargo&Co.WelltowerIncWendelWESTFRASERTIMBERWesternGasPartnersWestJet AirlinesWestlake ChemicalWeston GeorgeWhitecapResourcesWhitewaveFoodsWhitingPetroleumCorp.WholeFoodsMarketInc.WienerbergerAGWilmarInternationalLtd.WoodsidePetroleumWorleyParsonsWPCareyWPXENERGYINCWuerthWyndhamWorldwideCorp.WynnMacauLtd.XYLEMYakultHonshaCo.Ltd.YamanaGoldInc.YamatoHoldingsCo.Ltd.YamatoKogyoYamazakiBakingCo.Ltd.YapiveKrediBankasiYESBANKYuhanYum!BrandsZalandoZardoyaOtisZebraTechnologiesZFFriedrichshafen

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4 July 2017 CountrybyCountry(CbC)reportingisadoptedbytheEUParliament.

7 June 2017 Representativesfrom68OECDcountriessignthefirstMultilateralConventiontoimplementtaxtreatyrelatedmeasurestopreventbaseerosiontaxshifting.

29 May 2017 TheEUCounciladoptsthedirectiveonhybridmismatches,preventingcorporategroupsfromexploitingdisparitiesbetweentwoormoretaxjurisdictionstoreducetheiroveralltaxliability.

29 June 2016 The United States adopts CbCreportingregulationsformultilateralcompanies.

June 2016TheEUCounciladoptstheAntiTaxAvoidanceDirective.

27 January 2016 31countriessigntheMultilateralCompetentAuthorityAgreement(MCAA)fortheautomaticexchangeofcountry-by-countryreports.

November 2015 G20leadersendorsetheOECDBaseErosionandProfitShiftingProject(BEPS).

July 2015 Third Financing for Development (FfD)conference,includinglaunchofthe‘AddisAbabaTaxInitiative’whichaimstodoublesupportfortechnicaltaxationcooperationby2020.PartnercountriescommittostrengtheningrevenuemobilisationinordertoachievetheSustainableDevelopmentGoals.

March 2015The EU Commission endorses its TaxTransparencyPackage.

Annexe 2: chronologyRecent key dates

Annexe 3: Recent tax scandalsPanama papersThePanamaPapersareanunprecedentedleakof11.5mfilesfromthedatabaseoftheworld’sfourthlargestoffshorelawfirm,MossackFonseca.TherecordswereobtainedfromananonymoussourcebytheGermannewspaperSüddeutscheZeitung,whosharedthemwiththeInternationalConsortiumofInvestigativeJournalists(ICIJ).InApril2016theICIJsharedthepaperswithalargenetworkofinternationalpartnersincludingover50mediaoutletsaroundtheworld.

Malta filesInMay2017,thenetworkEuropeanInvestigativeCollaborationsreleasedhundredofthousandsofdocumentsshowinghowMalta’staxsystemallowscompaniestopaythelowesttaxonprofitsintheEU.

Theinformationincludedextensivedetailsofover70,000companiesinMalta’spubliccompanyregisterandshowhowMaltaworksasabasefortaxavoidanceinsidetheEU.AlthoughprofitingfromtheadvantagesofEUmembership,Maltaalsowelcomeslargecompaniesandwealthyprivateclientswhotrytoevadetaxesintheirhomecountries.ThisdamagesthebudgetsofotherEUcountriesandrevealsaweaknessoftheEuropeanUnion,whichallowsmemberstatessovereignrightsovertheirtaxation.

Bahamas Leaks InSeptember2016,theInternationalConsortiumofInvestigativeJournalists(ICIJ)releasedasetofnearly1.5milliondocumentsfromtheBahamascorporateregistry.TheBahamasLeakshavebeenincludedinthelarger‘OffshoreLeaksDatabase’,whichhasinformationonhalfamillionoffshoreaccountsandbusinesses,andgathersdatapublishedinpreviousleakssuchasthePanamaPapers.Theleakeddocumentsprovidenamesof politicians and others linked tomorethan175,000Bahamiancompaniesregisteredbetween1990and2016. Swissleaks

Thisscandalbrokeon8February2015whentheICIJexposedleakedfilesdetailingmorethan100,000clientsofHSBCbankinSwitzerland.Accountsfrom106,000clientsin203countrieswerepreviouslyleakedbywhistle-blowerHervéFalcianiin2007.

Amongotherthings,thedatashowedhowHSBChelpedclientssetupsecretbankaccountstohidecapitalfromtaxauthoritiesaroundtheworld,andassistingindividualsengagedinarmstrafficking,blooddiamondsandcorruptiontohidetheirillicitlyacquiredassets.The‘SwissLeaks’scandalbroughtbankingsecrecyintothepublicspotlight.

Lux LeaksThis scandal emerged in November2014whentheICIJexposedseveralhundredsecrettaxrulingsfromLuxembourg,whichhadbeenleakedbyAntoineDeltour,aformeremployeeofPricewaterhouseCoopers(PwC).TheLuxLeaksdossierdocumentedhundredsofmultinationalcorporationsthatwereusingthesysteminLuxembourgtolowertheirtaxrates.

Offshore LeaksInApril2013thisreportdiscloseddetailsof130,000offshoreaccounts.ItoriginatedfromtheInternationalConsortiumofInvestigativeJournalists(ICIJ),whocollaboratedwithreportersfromaroundtheworldtoproduceaseriesofinvestigativereports.Theinvestigationisbasedon2.5millionsecretrecordsabouttheoffshoreassetsofpeoplefrom170countriesandterritories,obtainedbyICIJ’sdirector,GerardRyle.

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Action 1 1

Addressing the Tax Challenges of the Digital Economy (DE): Action1addressesthetaxchallenges of the digital economy andidentifiesthemaindifficultiesthat the digital economy poses fortheapplicationofexistinginternationaltaxrules.TheReportoutlinesoptionstoaddressthesedifficulties,takingaholisticapproachandconsideringbothdirectandindirecttaxation.

Action 2 Neutralising the Effects of Hybrid Mismatch Arrangements: Action2developsmodeltreatyprovisions and recommendations regarding the design of domestic rulestoneutralisetheeffectsofhybridinstrumentsandentities(e.g.doublenon-taxation,doublededuction,long-termdeferral).

Action 3 Designing Effective Controlled Foreign Company (CFC) Rules:Action3setsoutrecommendations to strengthen therulesforthetaxationofcontrolled foreign corporations (CFC).

Action 4 Limiting Base Erosion involving Interest Deductions and Other Financial Payments: Action 4 outlinesacommonapproachbasedonbestpracticesforpreventingbaseerosionthroughtheuseofinterestexpense,forexamplethroughtheuseofrelated-partyandthird-partydebttoachieveexcessiveinterestdeductionsortofinancetheproductionofexemptordeferredincome.

Action 5 Countering Harmful Tax Practices More Effectively, Taking into Account Transparency and Substance: Action5revampstheworkonharmfultaxpracticeswithafocusonimprovingtransparency,includingcompulsoryspontaneousexchangeonrulingsrelatedtopreferentialregimes,andonrequiringsubstantialactivityforpreferentialregimes,suchasIPregimes.

Action 6 Preventing the granting of treaty benefits inappropriate circumstances:Action6develops model treaty provisions and recommendations regarding thedesignofdomesticrulestopreventtreatyabuse.

Action 7 Preventing the Artificial Avoidance of Permanent Establishment (PE) Status: Action7containschangestothedefinitionofpermanentestablishmenttopreventitsartificialcirconvention,e.g.viatheuseofcommissionairestructuresandthelikes.

Action 8-10 Aligning Transfer Pricing Outcomes with Value Creation Actions8–10containtransferpricingguidancetoassurethattransferpricingoutcomesareinlinewithvaluecreationinrelationtointangibles,includinghard-to-valueones,torisksandcapital,andtootherhigh-risktransactions.

Action 11 Measuring and Monitoring BEPS: Action11establishesmethodologies to collect and analysedataonBEPSandtheactionstoaddressit,developsrecommendations regarding indicators of the scale and economicimpactofBEPSandensurethattoolsareavailabletomonitorandevaluatestheeffectiveness and economic impact of the actions taken to addressBEPSonanongoingbasis.

Action 12 Mandatory disclosure rules: Action12containsrecommendations regarding the designofmandatorydisclosurerulesforaggressivetaxplanningschemes,takingintoconsiderationtheadministrativecostsfortaxadministrationsandbusinessanddrawingonexperiencesoftheincreasingnumberofcountriesthathavesuchrules..

Action 13 Re-examining Transfer Pricing Documentation and country-by- country reporting: Action 13containsrevisedguidanceontransferpricingdocumentation,includingthetemplateforcountry-by-countryreporting,toenhancetransparencywhiletakingintoconsiderationcompliancecosts..

Action 14 Making Dispute Resolution Mechanisms More Effective: Action14developssolutionstoaddressobstaclesthatpreventcountriesfromsolvingtreaty-relateddisputesunderMAP,viaaminimumstandardinthisareaaswellasanumberofbestpractices.Italsoincludesarbitrationasanoptionforwillingcountries.

Action 15 Developing a Multilateral Instrument:On7June2017,over70Ministersandotherhigh-level representatives participated in the signing ceremony of the MultilateralInstrument

Annexe 4: Summary of the OECD BEPS package1

Summary of BEPS package

1 http://www.oecd.org/tax/beps/beps-actions.htm

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Allrightsreserved.ReproductionanddisseminationofmaterialinthisreportforeducationalorothernoncommercialpurposesareauthorisedwithoutanypriorwrittenpermissionfromVigeoSASprovidedthesourceisfullyacknowledged.ReproductionofmaterialinthisreportforresaleorothercommercialpurposesisstrictlyprohibitedwithoutwrittenpermissionofVigeoSAS. P

roducedanddesignedbyVigeoSAS

Fouad Benseddik

Director of Methods and Institutional Relations

This study was written under the direction of:

Author:

Valérie Demeure

Head of Thematic Research

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