Which measures do we propose?

Publish What You Pay Norway (PWYP Norge) works to put in place bills for financial transparency in the extracting industries, in order to promote more sustainable societies.  We believe that financial transparency in the extracting industries, and other industries, will make it possible for residents in countries rich in natural resources to hold authorities and companies accountable for how society`s common natural resources are managed.

PWYP Norway`s central task is to increase knowledge about which mechanisms are employed by companies so that natural resources do not benefit their country of origin nor the residents of that country.  Many of these mechanisms are country based, and these are dealt with by the various departments within Publish What You Pay, but many of those mechanisms are also related to mechanisms specifically developed for countries in the North with the objective of ensuring that the revenue of the multinational companies are maximized at the expense of tax revenue which is attempted to be minimized.  PWYP Norway has contributed with knowledge and paved the way for a good and critical debate in Norway concerning the need for, and the importance of, financial transparency for a sustainable development.

PWYP Norway has made a list of measures that we work to get imported or that we can recommend to countries that have issues within defined areas of capital flight.  This does not mean that we work with all measures ourselves or emphasize all measures equally in our daily work.

Extractive Industries Transparency Initiative (EITI)Approved- EITI has been mainstreamed in Norway
Country-by-Country reporting (CBCR)Approved- Expansion to several countries
Open Government Partnership (OGP)Approved- Efforts underway to introduce obligations
Extended Country-by-Country Reporting (ECBCR)Partly approved- Complete the regulation by changing six words so that the regulations cannot be circumvented. Expansion to several countries.
Reverse Tax Credit In dialog- Work is underway to make the measure known
Mark-to-Market (M-t-M)In dialog- Work is underway to make the measure known

PWYP Norway prioritizes promoting knowledge, both information about the mechanisms and how these can be counteracted, in areas that are under-focused in relation to capital flight (information) or where there is a lack of unilateral measures that countries can utilize immediately.  This is in line with PWYP Norway`s vision, which is that it takes too much time to establish good quality information (which is why PWYP Norway works with extended country-by-country reporting) and that it takes too much time to acquire statutory effective mechanisms to reduce or eliminate capital flight (accordingly, PWYP Norway works with unilateral mechanisms as an alternative to international work which has proven to take too much time and brings forth too weak counter-mechanisms).


There are “two entrances” here; (1) “what is the problem” and (2) “What measures can contribute to prevent which problems”.  We often get questions about which “action list” we recommend.  But that depends on which problem you wish to solve.  Many measures that are either currently in process or already exist, are difficult to acquire precise information from and it is still possible to avoid several rules that are in place.  PWYP Norway has documented how multinational companies establish impenetrable group structures and establish corporate structures with the use of tax havens.  The effect is fragmentation in many companies so that the group map becomes complex, and the relationship between the various parts becomes unclear.  Various financial instruments can then be employed to siphon revenue out of the country before taxation.  Currently more than half of the largest 100 economies in the world are multinational companies.  Many of those companies are in the extracting industries.

The instruments PWYP Norway recommend are precise and more difficult for those who desire and have the will to utilize mechanisms to avoid regulations, and in addition they increasingly handle more concrete issues. 

  • Companies keep information secret which is important for knowing whether countries get the correct tax receipts.  Without information a legislator cannot make the right laws, and without information investors cannot make the correct choices on which companies to invest in.

    Which mechanism do we propose?

    Adoption of extended country-by-country reporting, ECBCR, is the best tool for both investors and legislators.

    The disclosure must at minimum contain information on investments, production, revenue, expenses, taxes in accounting and paid taxes and number of employees and how ownership in the various companies stand. 

    Why is this effective?

    One of the most significant shortcomings society has is a lack of information on what goes on within a multi-national company.  This information must out so that all the decision-makers can make the right decisions where multinational companies are concerned.

    Read PWYP Norway`s input here. 

    Read PWYP Norway`S report "An Extended country by country reporting. A policy proposal to the EU. Vol. 2.".

  • Companies keep information hidden that is important to know whether countries are getting the correct tax receipts or not.  Without information legislators cannot make the right laws, and without information investors cannot make the right choices on which companies they should invest in.

    Which mechanism do we propose?

    Adoption of extended disclosure, also knows as extended country-by-country reporting or "ECBCR", is the best tool both for investors and for legislators.  Disclosure must at a minimum contain information on investments, production, revenue, expenses, taxes in accounting and paid taxes along with the number of employees and how ownership in the various companies work.

    Why is this effective? 

    One of the most significant shortages society has is a lack of information on what goes on within a multinational company.  This information must be available so that all decision makers can make the right decisions where multinational companies are concerned.

    Read PWYP Norway`s political input here. 

    Read PWYP Norway`s report "An Extended country by country reporting. A policy proposal to the EU. Vol. 2.".

  • In 2011 the all-encompassing use of tax havens was still unknown to most.  The report “Piping profits” was made to focus on the problem of the extensive use of tax havens.  In the aftermath many, also international bodies, have come up with information on the use of tax havens, and a number of scandals internationally have shown the destructive effects of tax havens.

    What mechanism do we propose?

    The most important tools against tax havens are information on the use or mechanisms that counteract the effects.

    Extended country-by-country reporting and adoption of transparency guarantee/ transparency legislation will lead to significantly better information to society (ECBCR) or to tax authorities (Transparency guarantee).

    Mechanisms that counteract the use of tax havens are derivatives in own tax base (derivatives) and use of internationally recognized mechanisms such as deductions, by making mechanisms such as reverse tax credit (counteracts general use of tax havens except for derivatives).

    Why is this effective? 

    Information is the most important source to correct handling of tax havens.  This is why adoption of extended country-by-country reporting (as long as it covers ALL countries) is effective.  Adoption of transparency guarantees minimize the tax authorities` information collection and contributes to keep down expenses tied to tax administration.

    Derivates in their own taxbase is 100% effective against derivative abuse because of the legislation and the easy way of controlling the result.

    Reverse tax credit does not increase the taxes through increased revenue, but leads to companies` expense deduction being limited to the company`s realized tax expense internationally.  The use of low-tax countries then becomes effectively eliminated on the expense side (but not the revenue side).

    Read PWYP Norway`s input here . 

    Read PWYP Norway`s report "Piping profits".

  • Tax authorities lack mechanisms to follow transactions all the way through a group structure (audit trail).

    What mechanism do we propose?

    The adoption of a transparency guarantee when a company is established in a country.

    Why is this effective? 

    The need for information by tax authorities is not served by secrecy, lawyers, and backpedaling techniques.

    Read PWYP Norway`s report "Transparency Agreement - a tool for multinational transactions".

  • The report  "An Extended country by country reporting. A policy proposal to the EU. Vol. 2."   was created to provide an overview of accounting information country-by-country.  A side effect of this is that one also acquires an overview of ownership.  In addition, PWYP has been a contributor to establish EITI, where real ownership is a requirement for all countries that adopt EITI (so far 52).

    What mechanisms do we propose?

    Extended country-by-country reporting (ECBCR) automatically entails declaring what companies are involved in the activity in the various countries.  Through country-by-country reporting the companies automatically “take responsibility” for ownership of the relevant companies. 

    Why is this effective? 

    EITI is effective in the individual production country because one gets an overview of the final owner of the companies in the countries.  ECBCR is effective because it supplies an overview of the whole group structure in a company, including tax haven countries, which EITI cannot do.

    Read PWYP Norway`s report "An Extended country by country reporting. A policy proposal to the EU. Vol. 2.".

  • Client confidentiality is an important part of rule of law.  Client confidentiality can however be grossly abused if it is used to hide information about what lawyers do ACTIVELY to help companies with capital flight.

    What mechanism do we propose?

    Easing of lawyers` confidentiality by transaction consultation.  Stop lawyers from assisting in trials when they have assisted in transaction consultation (the same way auditors cannot both aid in transaction consultation AND audit the company they consulted for).  The lawyer that assists in any trial would then be covered by confidentiality.

    Why is this effective? 

    This is effective because lawyers cannot utilize a tool that is meant to protect society`s interests (confidentiality in client relationships) to actively assist companies in abusing societal interests (capital flight).

    Read PWYP Norway`s political input here.

    Read PWYP Norway`s report "Silence is golden".

  • While transfer mispricing is a well-known tool for companies where capital flight is concerned, the extent of this use is not well documented other than for individual companies. The objective of the report;  "Lost billions. Transfer Pricing in the Extractrive Industries"  was to demonstrate the extent in total (EU and USA) for a whole industry (multinational oil and gas companies).

    What mechanism do we propose?

    Information is one of the best devices against mispricing, and extended country-by-country reporting (ECBCR)  is a measure to show society where the profit in group companies end up in that also tax havens must be included in extended country-by-country reporting.  Reverse tax credit is an initiative that can lead to the effect of mispricing being eliminated on the expense side.   This is accomplished when deductions for expenses in the corporate context are adjusted to the tax rate that the multinational companies achieve internationally (effective tax rate).  Reverse tax credit can be legislated unilaterally by the individual country and complies with acknowledged principles that have been used internationally for more than 50 years and which are enshrined in OECD`s model tax agreement for revenue and capital. 

    Why is this effective? 

    Without information legislators, investors, and others stumble around blindly.  To bring information to light is therefore essential, and this is what ECBCR does.  Reverse tax credit as a measure is effective because it reduces the tax deduction for expenses that run across the group structure down to the tax rate that has been achieved for the group as a whole internationally (effective tax rate).  Since this is the tax rate which each individual group has worked to achieve, it is only fair that the expense deduction is valued according to the same tax rate.  Reverse tax credit eliminates the need for tax havens.

    Read PWYP Norway`s political input here.

    Read PWYP Norway`s report "Lost billions. Transfer Pricing in the Extractive Industries".

  • Rigid tax systems that are constantly altered because they do not meet the legitimate requirements from either taxpayer or authorities are a problem.  The tax mechanisms that are used for extracting companies are often the grounds for conflict.  This is particularly true for tax levels.

    What mechanism do we propose?

    Windfall taxes are total taxes that protect the companies against too high taxation under a certain price/revenue level, but the same taxes ensure higher revenue to the authorities above this price/revenue level.

    Why is this effective?

    By taking into consideration both high and low price/revenue levels the taxation system becomes more stable (the need for alterations lessen).  The only need is to monitor the threshold for windfall taxes and adjust over time.

    Read PWYP Norway`s report "The Case for Windfall Taxes - a guide to optimal taxation".

  • Higher tax deductions for expenses than taxation of revenue because of capital flight is a problem.  Disproportionality in revenue and expense taxation leads to almost as large losses of tax revenues as loss of untaxed revenue as a result of capital flight.

    What mechanism do we propose?

    Reverse tax credits uses principles enshrined in OECD`s model tax agreement and which has been used for more than 50 years for distribution of taxation for revenue.  Reverse tax credit turns the principles and make these useful for expense deductions, so that the tax effect from the expense deduction is adjusted to the effective tax rate in each individual multinational company.

    Why is this effective?

    The mechanism is 100% effective at eliminating the effect of tax havens and other low tax jurisdictions and eliminates the need for these group structures in order to be competitive when confronted with other multinational companies.  The mechanism has the inherent ability to stop «the race to the bottom».

    Read PWYP Norway`s report "Taking away the tax effect of tax havens. Cross border taxation methods and reverse tax credit".

  • If everything else fails for a multinational company, the company can make sure to sell the activity to other companies at levels that do not generate tax liability, which enables the system of capital flight because the buyer is forced to use capital flight mechanisms in order to justify the price that is paid.

    What mechanism do we propose?

    Ensure that buyer must be approved by authorities and that the authorities are permitted to withdraw the licensing rights if buyer is not approved (for sale to others directly from the authorities, for example in an auction).  Alternatives to taxation:

    1. Local taxation without adjustment of depreciation basis.

    2. Global taxation with adjustment of depreciation basis and deduction for taxes in corresponding jurisdiction(s).  Input value is remaining tax deductible value.

    Why is this effective?

    The measures are only effective if countries facilitate for the mechanisms IN ADVANCE of establishing rights for extracting industries.  Statutory or legal basis placed in an unalterable part of model agreements.

  • Mark-to-market (MtM) mechanisms both in accounting principles, pricing of deliveries, and in contracts lead to instability in the world economy and capital flight in line with or above abuse of derivatives.

    One of the most widely used and most rejected instruments for capital flight, which is also a significant source of instability in the world economy.

    Which mechanism do we propose?

    Limit mark-to-market accounting principles to liquid asset classes.  For other companies than financial institutions, move derivatives to a separate tax base. Distribute depreciation above a certain level over several years in order to limit unwanted fluctuations in the world economy.  At minimum ensure that the use of mark-to-market in financial institutions does not result in cash flows like increased dividends or increased bonuses.  Isolate the equity effect.  Preferably eliminate the use of mark-to-market for unrealized derivative gain entirely.  Adopt reverse tax credit on the expense side.

    Why is this effective?

    The measures limit the negative effects of mark-to-market both concerning:

    1. MtM-accounting – reduces the fluctuations in companies` economy and thus fluctuations in world economies.

    2. MtM-pricing – reverse tax credit eliminates the effect of Mtm pricing to a minimum.

    3. MtM-contracts – derivatives in its own tax base eliminates the effect of MtM contracts on the tax receipts from operational revenue.

  • What mechanism do we propose?

    PWYP Norway supports the use of parent company guarantees towards authorities so that group companies will be jointly responsible with daughter subsidiary towards obligations as a result of the activity in the country.  Most relevant when facing bankruptcy clean-up costs.

    Why is this effective?

    Results in groups of companies not being able to run away from clean-up costs in a potential bankruptcy.


PWYP Norway has worked with specialized knowledge about financial secrecy in the extracting industries for ten years, and particularly concerning:

  • where the leaks occur
  • what techniques are utilized
  • which mechanisms work together
  • how it is made possible
  • who facilitates this
  • how it is possible to intervene and do something about this
  • which transparency measures can counteract which types of leaks

We have done this because it is necessary with in-depth understanding of which drainage techniques multinational companies can use in the extracting industries that can hurt a country`s tax base.

PWYP Norway`s evidence-based research has offered a robust basis for PWYP Norway`s work and relates to which measures can function as effective measures for various kinds of problems to be solved, and within an area where it is difficult to envision how else they would have been covered.

There is an intensified hunt for natural resources all over the world.  The extracting industries are characterized by great secrecy and in many countries, it is life-threatening to challenge their authorities on transparency.  All over the world there currently exists a clear and increasing back-lash against civil society activists that work for a fair use of their countries` resources, also in OECD countries.  It has become more dangerous to ask questions about the handling of countries` natural resources, to demand transparency concerning management of natural resources, and that natural resources should benefit the population.  It is equivalent to meeting great differences of power.  Only in 2015, 185 activists were killed who had worked for transparency and to protect the environment.  

Production of knowledge is the core that lies at the root of all work in our other areas of work.  There has been great demand from both the Global South and the Global North for this kind of in-depth understanding.