Questionnaire: Country-by-Country Reporting by Multinational

Companies

The Danish government welcomes the initiative by the European Com-mission to evaluate the feasibility of requesting certain companies, to dis-close some key financial information regarding their activities in thirdcountries. The Danish government is with great interest following the in-ternational initiatives taken in this area.Country-by-country reporting in general offers a number of interestingpossibilities - but also provides a number of challenges.Any possible regulation should be done globally - partly to achieve thewanted effect, partly to protect against unfair competition.The overall objective of country-by-country reporting is greater transpar-ency. Basically greater transparency will benefit investors as well as theoverall economy. Therefore it is appropriate to constantly evaluate the re-quirements of the accounts as well. It also applies to the need for infor-mation about where and how multinational companies generate theirprofit. Country-by-country reporting is an example of information thatmight be relevant to describe the activities of the company, etc.It is also important to be aware that too much detailed information on aparticular area might blur the sight of the companies’ financial situationand thus be of more harm than benefit.In evaluating the value of country-by-country information it is relevantfirst to determine the exact purpose of such and the specific audience.Such an analysis is an important element in determining whether the pur-pose is best achieved by requiring any country-by-country data includedin financial statements or if the purpose is better achieved by othermeans, for example through initiatives like the Extractive IndustriesTransparency Initiative, EITI. In relation to the actual tax payment thevalue of country-by-country report should also be compared with the use-fulness of emphasizing the actual tax control.It is also important carefully to assess what information might be re-quired. In this context it will be relevant to examine whether reporting foreach country where a company operates in all cases would be the rightcut. A multinational company may have several subsidiaries in one par-

ticular country that have different activities and is completely independ-ent of each other. Since the activities within the individual countries canbe very diverse and subject to various conditions, a direct numericalcomparison country-by-country could be more misleading than enlighten-ing.Moreover, the pure numerical data often can not stand alone. Often theyneed to be accompanied by a verbal description to be useful for the users.Information requirements applying only to European companies couldharm them in the global competition due to the fact that they should dis-close to their competitors information that these not themselves are re-quired to disclose. It is also important that the requirement for listedcompanies does not give them unnecessary burdens compared to othercompanies, which could make it less attractive to be listed. If it becomesless attractive to be a listed company, some companies would raise lessadditional capital detrimental to economic growth and creating new jobs,etc.It is thus crucial that the information that might be required have beensubjected to a careful cost-benefit assessment. In this context it must alsobe assessed whether new reporting requirement increases the administra-tive burdens on the companies concerned unnecessarily.As part of the uncovering of the need for country-by-country reportingand the uncovering of which data, if any, should be required, it will beobvious to look at lessons learned from the initiatives already underway,not least the recent U.S. initiative regarding extraction industries andEITI.