By Rachel Baird | 9 February 2012
We were pleased this week when the Daily Mail’s report on a planned mega-merger between two multinationals included a comment from Christian Aid’s David McNair, highlighting the vast impact the new company will have on people and the environment around the world – for better or for worse.
The two companies involved in the £56 billion deal are both members of the FTSE100 index: Xstrata, a vast mining company, and Glencore, a giant which trades in commodities such as wheat, oil and copper.
You may own shares in them directly or via your pension fund and you may also buy products which have passed through their hands, such as bread, petrol and heating pipes.
So what is Christian Aid’s take on the planned merger?
At this early stage, our main impression is that the shake-up is a great opportunity for them to introduce greater transparency into their finances.
‘The proposed merger will create a huge company with a massive impact on people and the environment, for better or for worse,’ David McNair told me.
`Assuming the merger proceeds, then one hugely important part of the new company’s impact will be its tax payments in the countries where it operates.
‘Tax is needed to fund public services such as hospitals and schools for millions of people across the world.
‘But financial secrecy makes it difficult to tell whether multinational companies such as Glencore are paying the right amount of tax.’
Followers of our Trace the Tax campaign will know that Christian Aid estimates that poor countries lose around $160 billion a year to taxdodging by multinational corporations – more than they receive in aid.
They may also know that there have been suggestions that Glencore may not have paid the right amount of tax in Zambia – allegations which the company denies.
David added: ‘At present it is impossible to know where the truth lies, because financial secrecy obscures Glencore’s finances – along with those of many other multinational companies around the world.
‘Given the colossal size of a merged Glencore-Xstrata, there is likely to be ongoing interest in its tax contributions to the countries from whose natural resources it is profiting.
‘Christian Aid urges the newly merged company to adopt new, highly transparent financial reporting practices, to help reassure governments, citizens and public interest groups the world over that it is paying the right amount of tax, in the right place and at the right time.’
In practice, this is likely to mean country-by-country reporting – the accounting standard Christian Aid has been advocating for some time.
It requires companies to publish financial information such as the profits they make and the taxes they pay separately for each country in which they operate. This, in turn, would make it much easier for tax authorities and others to spot suspicious cases which warrant further investigation.
Fortunately, Christian Aid is far from the only organisation taking an interest in mining companies’ tax payments.
Recently, we’ve been joined by MPs on the House of Commons’ International Development Committee, who are currently investigating how tax contributes to poor countries’ development.
The MPs say they are especially interested in payments by ‘extractives’ companies – and that means the likes of Glencore and Xstrata.
Let’s hope, then, that they too see the opportunity arising from this latest mega-merger.
