Beyond Country-by-Country Reporting : A Modest Proposal to Enhance Corporate Accountability

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Abstract

The issue of corporate accountability is as old as the corporate form. Regulators have conventionally sought to ensure corporate financial accountability by requiring companies to make public financial disclosures, with shareholders and creditors able to act on that information in their dealings with the company. Over time, these financial reports were considered inadequate in addressing the economic, social and environmental consequences of multinational enterprises. As a result, the system of corporate accountability has developed around two main pillars: corporate governance and corporate social responsibility (CSR), with the former focusing on accountability to shareholders and the latter on accountability to wider stakeholders. However, these pillars have failed adequately to address the ways in which companies contribute to, and impact upon, the economic sustainability of the societies in which they operate. As public concern about aggressive tax avoidance by the largest corporate groups has grown, another means of holding companies accountable has begun to develop, centred on country-by-country (CbC) tax reporting. Although its origins can be traced to efforts to enhance CSR, CbC tax reporting has, until recently, largely been viewed by policymakers as a mechanism to address tax integrity rather than as part of the broader project of ensuring public corporate accountability. In this article, we argue that public CbC tax reporting has the potential to form a third pillar of corporate accountability, supplementing corporate governance and voluntary CSR, and enabling shareholders and stakeholders better to hold companies to account. We then argue that, in order for CbC tax reporting to contribute to these wider accountability goals, it should go beyond current proposals for quantitative disclosure of tax payments and take the form of a mandatory Comprehensive Accountability Report which contains both quantitative and qualitative data.

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