Commissioner Michel Barnier welcomes the agreement on disclosure requirements for extractive and forestry industries and on simpler accounting requirements for small companies

Brussels, 10-4-2013 — /europawire.eu/ — I congratulate the European Parliament, in particular the rapporteurs Klaus-Heiner Lehne and Arlene McCarthy, and the Council, in particular the Irish, Cypriot and Danish Presidencies on reaching this important agreement. The agreement on the disclosure requirements for the extractive and forestry industries shows how EU legislation can be a catalyst for change in developing countries. Local communities in resource-rich countries will finally be better informed about what their governments are being paid by multinationals for exploiting oil and gas fields, mineral deposits and forests. The agreement will bring in a new era of transparency to an industry which is far too often shrouded in secrecy and help fight tax evasion and corruption as well as create the framework so both companies and governments can be held to account on the use of revenues from natural resources.

This evening’s agreement also covers new, simpler accounting requirements for the preparation of financial information. This will result in a reduction in the administrative burden for small companies (SMEs). SMEs are the backbone of the real economy and we must continue to make it easier for them to inject the dynamism our economy so desperately needs.

Today’s agreement is an important step in fulfilling our objectives for more responsible businesses. It follows up on commitments agreed under the Single Market Act I with the aim of fostering a sustainable and inclusive growth model. The agreement on disclosure requirements is also in line with the commitments made at G8 level in May 2011 under President Barroso’s leadership where the Commission has been a strong advocate for the Extractive Industry Transparency Initiative (EITI).

Background

On 25 October 2011 the Commission adopted a legislative proposal (see IP/11/1238 and MEMO/11/734) requiring the disclosure of payments to governments on a country and project basis by listed and large¹ non-listed companies with activities in the extractive industry (oil, gas and mining) and loggers of primary forests (the so-called country by country reporting – CBCR). The European Commission proposal followed guidelines developed by the Extractive Industry Transparency Initiative (EITI) but once adopted by the European Parliament and Council these requirements will be put into European law, thereby making them binding. This puts the EU on a level playing field with the US which also adopted disclosure requirements in July 2010 (Section 1504 of the Dodd-Frank Act).

The Commission has publicly expressed support for the Extractive Industry Transparency Initiative (EITI), and envisaged willingness to present legislation mandating disclosure requirements for extractive industry companies. A similar pledge was made in the concluding Declaration of the G8 Summit in Deauville of May 2011, where the G8 governments committed “to setting in place transparency laws and regulations or to promoting voluntary standards that require or encourage oil, gas, and mining companies to disclose the payments they make to governments.

This disclosure requirement has been incorporated in the proposals to revise the Accounting Directives (78/660/EEC and 83/349/EEC) and the Transparency Directive (2004/109/EC). The existing Accounting Directive regulates the information provided in the financial statements of all limited liability companies which are registered in the European Economic Area (EEA). The same disclosure requirement has been incorporated in the proposal to revise the Transparency Directive in order to include all companies which are listed on EU regulated markets even if they are not registered in the EEA and incorporated in a third country. With today’s agreement, negotiations on the Transparency Directive can now be concluded swiftly.

The new agreement establishes rules ensuring that these companies disclose payments to governments (e.g. taxes on profits, royalties, and licence fees) on a country and project basis. Reporting would also be carried out on a project basis, where payments have been attributed to specific projects. The text requires the Commission to review the possibility of extending the disclosure requirements to other sectors.

At the same time, the Commission proposed reducing the administrative burden for small companies. This key initiative is part of the Single Market Act (SMA) of 13 April 2011, in which the Commission set out twelve levers to re-launch the Single Market for 2012 for sustainable, smart and inclusive growth (see IP/11/469). Two of the key actions identified were the creation and development of small and micro enterprises, by introducing smart regulation and cutting red tape and the creation of an eco-system conducive to the development of social entrepreneurship. This Directive will create a safer harbour in which small companies will be protected against obligations to produce onerous information in their financial statements. Such protection will mainly be relevant to the notes and statements to be prepared. Simplification will vary between small companies depending on their size and on the jurisdiction in which they are located.

More information

http://ec.europa.eu/internal_market/accounting/other_en.htm