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Sep 04, 2013

Investors call for tax disclosure ruling

Consortium with assets of $5.6 tn demands greater public disclosure by US and Canadian extractive companies

A group of institutional investors has called for more stringent regulation surrounding the disclosure of significant tax and royalty payments made by companies that extract natural resources.

The consortium, which comprises a number of leading international institutions, has urged regulators to implement tough new public disclosure rules for oil, gas and mining companies listed in Canada. It has also called for the US to avoid withdrawing or weakening its own rules for such companies.

In letters addressed to the SEC and Natural Resources Canada (NRC), investors suggest that a consistent global standard should be adopted for all notable tax or royalty payments paid by extracting companies across their global operations.

The move comes in the wake of a number of measures intended to deter corruption, sparked by the passing of the Dodd-Frank Act in the US three years ago, which promoted transparency in the sector. 

The EU has implemented similar requirements in its transparency and accounting directives in June 2013 and the Canadian prime minister – Stephen Harper – announced equivalent rule changes for Canadian-listed companies at the G8 summit in June.

In July, however, a US federal judge struck down an SEC ruling that would have obliged oil companies and miners to disclose payments made to foreign governments just two months before it was due to take effect. 

US district court judge John Bates ruled in favor of the American Petroleum Institute, which along with other trade bodies criticized the SEC rule as ‘anti-competitive’.

‘The denial of any exemption for countries that prohibit payment disclosure was arbitrary and capricious,’ Bates wrote in his decision. ‘The commission offers no persuasive arguments that the statute unambiguously requires public disclosure of the full reports.’

The institutions backing the most recent action – 32 of which support the submission to NRC and 44 to the SEC – include LAPF, Allianz Global Investors, Calvert Investments, Legal & General and UBS Global Asset Management.