Firms will have to declare payments they make to governments for oil, gas and mineral rights under proposals unveiled by Business Minister Jenny Willott today (28 March 2014).
In a new consultation, the government has laid out potential reporting requirements that will see large oil, gas, mining and logging companies who operate in the EU set out the payments they make to governments around the world.
Boosting transparency by requiring large extractive companies to publicly report on the billions of pounds worth of payments they make, will give people the detailed information they need to hold governments to account.
The regulations could benefit UK companies operating in resource rich developing countries, by helping to reduce business risks and provide a transparent business environment.
The regulations, alongside the ongoing work to implement the Extractives Industries Transparency Initiative (EITI), support the government’s ambition for strong extractives reporting. This consultation is a significant step forward in delivering this ambition.
Business Minister Jenny Willott said:
The payments that international oil, gas, mining, and forestry companies make to foreign governments have the potential to dramatically boost economic growth and help resource-rich developing countries to pull themselves out of poverty.
These proposals, alongside the EITI, will mean citizens can access the detailed information they need to hold their governments to account once and for all. This is good for government, good for business and good for citizens.
The consultation seeks views on how extractive reporting requirements should work. The aim is to put in place a reporting regime that facilitates transparency, without placing unnecessary burdens on business. It closes on Friday 16 May 2014.
Notes to editors:
1.The consultation into Chapter 10 of the Accounting Directive can be found at https://www.gov.uk/government/consultations/extractives-industries-reporting-implementing-the-eu-accounting-directive and will close on Friday 16 May 2014. It forms part of the EU Accounting Directive. For more information contact: email@example.com.
2.Under the Directive the regulations must be in place no later than 20 July 2015 however, in line with the UK government’s commitment to quickly implement reporting of payments to governments by the extractives industries, we hope to implement sooner.
3.The directive would apply to all large or listed companies registered in the UK and engaged in the extraction of oil, mineral, gas and the logging of primary forests.
4.The latest ONS figures for oil and gas receipts for 2011/12 shows total revenues of £11.2 billion.
5.Under the proposals a company is large if it fulfils 2 out of 3 of the following criteria:
- a balance sheet of more than £17.8 million
- a net turnover of more than £35.6 million
- average number of employees during the financial year to which the balance sheet relates exceeds 250
6.Reports must be prepared on an annual basis. They must include:
- disclosing all payments made in money or in kind, whether made as a single payment or series of related payments, totalling £84,800 or over
- disclosing the total amount of payments to each level of government, including national, regional and local governments, and state owned organisations
- disclosing the total amount per type of payment (e.g. taxes levied on income, royalties, and dividends)
7.The UK government will also introduce a penalty regime to apply if companies fail to comply with the new reporting regime.
8.The Accounting Directive will be complemented by the global EITI. Under the EITI, extractives companies operating in the UK would report material payments to the UK government who in return would also report the receipts it received. The payments of tax, licence fees and other receipts would be disclosed in reports conforming to the EITI standards. The UK has begun the implementation process with the aim of applying for candidacy this year. For more information please see Finance and taxation - Extractive Industries Transparency Initiative
9.The government’s economic policy objective is to achieve ‘strong, sustainable and balanced growth that is more evenly shared across the country and between industries’. It set 4 ambitions in the ‘Plan for Growth’, published at Budget 2011:
- to create the most competitive tax system in the G20
- to make the UK the best place in Europe to start, finance and grow a business
- to encourage investment and exports as a route to a more balanced economy
- to create a more educated workforce that is the most flexible in Europe
Work is underway across government to achieve these ambitions, including progress on more than 250 measures as part of the Growth Review. Developing an Industrial Strategy gives new impetus to this work by providing businesses, investors and the public with more clarity about the long-term direction in which the government wants the economy to travel.