European companies involved in mining and other extractive industries worldwide will be obliged to disclose payments made to governments, under a new directive agreed under the Irish presidency of the European Council.
The obligation on large companies and public-interest entities to report payments to governments, many in the developing world, has been one of the most controversial aspects of the new EU accounting directive which will result in a significant reduction in red tape for businesses across the European Union.
NGOs and lobbyists, including Bono, have strongly advocated the introduction of an EU extractive transparency law, arguing that companies should be obliged to disclose publicly what they pay to the governments for exploiting gold, gas and other minerals.
The legislation, which is unlikely to enter into force before 2016, could have implications for companies such as Tullow Oil, which have a significant presence in Africa. The US introduced similar legislation last year. However, some NGOs had argued that telecommunication and construction companies should also be included in the directive.
The agreement reached this evening in Brussels also introduces new, simpler accounting requirements for companies.
This includes the reduction of reporting requirements for SMEs and the introduction of an exemption from preparing consolidated financial statements for small groups. Other changes introduced include a simplification and clarification of notes to the accounts, and the requirement to publish accounts within 12 months of the end of the financial year. The previous distinction between ordinary and extraordinary items within the profit and loss account is also being removed.
The simplification of the financial reporting process aims to encourage greater comparability between member states. It is estimated that the new directive will reduce savings for SMEs by more than €1.5 billion a year.
Minister for Enterprise Richard Bruton said the agreement represented one of the final outstanding elements of Single Market legislation, a key priority for the Irish presidency of the European Council.
“At the heart of this directive is the drive to cut red tape and reduce the administrative burden on SMEs. That is why this agreement is so important,” he said, noting that the Irish presidency had already signed off on the Unified Patent Court Agreement. “I will continue to push for progress on the remaining Single Market Act measures because full implementation of these measures has massive potential to boost economic growth and create jobs.”
EU commissioner Michel Barnier said the new 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," he said.
