The UK-based international development agency Christian Aid has welcomed a new US law which will challenge corruption in poor countries and boost the pressure for global reforms to combat tax dodging and bribery.
The Dodd-Frank Wall Street Reform and Consumer Protection Act requires hundreds of major oil, gas and mining firms to declare the tax and other payments that they make to governments in all countries where they operate.
The reform will lead to greater accountability, giving citizens of countries where such companies operate a clearer idea of the scale of the revenues flowing into government coffers.
Among those welcoming the development are the billionaire philanthropist George Soros and U2 lead singer Bono, co-founder of the ONE campaign which fights extreme poverty and preventable disease.
Dr David McNair, Christian Aid’s Senior Economic Justice Adviser, said: "Many developing countries where Christian Aid works are sitting on massive resource wealth, but people living in poverty derive little benefit because of tax dodging and corruption."
He continued: "The transparency created by this new law will increase companies’ accountability by giving the parliaments and citizens of the countries in which they operate a much clearer idea of the true nature of the deals struck between government ministers and extractive industries. It will also enable them to spot financial abnormalities that could point to corruption."
"The Act is a landmark on the road towards comprehensive transparency around companies’ tax and other payments to governments,’ said Dr McNair. ‘The logical next step is to apply such transparency globally. The International Accounting Standards Board is currently discussing a similar standard, which would apply in more than 100 countries," said Dr McNair.
A provision in the Dodd-Frank Wall Street Reform and Consumer Protection Act requires energy and mining companies registered with the Securities and Exchange Commission (SEC) to report their payments to foreign governments in respect of the extraction of oil, gas, and minerals.
The reporting has to be done on a country-by-country basis, which means that payments are declared separately for each country in which a firm operates.
Last month, the Hong Kong Stock Exchange (HSX) implemented a similar new rule, requiring new applicant mineral companies to disclose their payments to host country governments.
Christian Aid is campaigning for such measures to apply to all listed companies, not just those in the extractive industries. It is also campaigning for an end to the financial secrecy which facilitates massive tax dodging from developing countries.
International agencies such as the Organisation for Economic Cooperation and Development recognise that the scale of the problem is likely to be greater than those countries receive in aid. Christian Aid estimates that the total losses to developing countries amount to US$160 billion a year.