Promoting good corporate governance and sustainability policy

Eumedion believes that every multinational should not only disclose their tax contributions for all EU Member States, but for all countries they operate in. In addition, this country-by-country tax information must be audited by the external auditor. This follows from the statement Eumedion published today with respect to the proposed European directive on country-by-country tax reporting.

Eumedion has always supported the European Commission’s proposal to introduce an obligation for multinationals to publicly report where taxes are paid (‘country-by-country tax reporting’). Promoting greater disclosure of taxes paid per jurisdiction increases overall transparency and allows for a more detailed analysis by investors and better engagement on tax-related topics. In the light of the current negotiations between the EU institutions, Eumedion has published a statement with some comments on the positions of the European Parliament and the European Council. In the statement Eumedion writes that it supports the position of the European Parliament that the country-by-country information should not only be provided for each EU Member State but also for each tax jurisdiction outside the European Union. Furthermore, Eumedion states that it believes that the directive should be strengthened by requiring that the information in the country-by-country report should be audited by the external auditor. And by requiring that the aforementioned information shall be published as an annex to the annual financial statements.

The position paper ‘Towards a global, investor focused standard setter for corporate non-financial reporting’ that Eumedion published today, calls on the IFRS Foundation (‘Foundation’) to expand its mission. The Foundation should establish a separate standard setting board for non-financial reporting, next to the existing International Accounting Standards Board for financial reporting. The Position Paper concludes an extensive consultation following the publication of Eumedion’s Green Paper ‘Towards a global standard setter for non-financial reporting’ published on 30 October 2019 (‘Green Paper’).

The Green Paper provided a sound starting point for a broad discussion with stakeholders. Nine respondents provided us with written feedback. The subsequent evaluation of all the input received, also provided a firm basis for the other stances in the position paper. Most notably that investors struggle to assess how a company creates long-term value and how a company lives up to the valid needs of society where non-financial performance matters; that enforceable and consistent international standards are needed to ensure that non-financial reporting is faithfully represented; and that the auditor should provide more assurance on the management report: reasonable assurance on certain non-financial key performance indicators, and limited assurance on the entire management report. Eumedion publised a feedback statement on 24 July.

The position paper further acknowledges the EU’s strong commitment to a sustainable future. Eumedion would welcome a leadership role of the EU that clearly recognises the global nature of the challenges faced; the need for, ultimately, global reporting standards; and the necessity of a governance structure of the standard setter that fosters international buy-in from jurisdictions whose commitment to a sustainable future is similar to the EU’s.

In the above light, Eumedion is pleased that the EC Commissioner Mr. Dombrovskis recently reiterated his stance that ‘… non-financial reporting standards would be open, transparent and inclusive, as we want to avoid fragmentation of global capital markets’. Eumedion remains confident that the IFRS Foundation involvement herein will remain part of the discussion on how to realise this vision.

We are also pleased to learn from the minutes of the IFRS Foundation Trustees & Due Process Oversight Committee as published last Friday, that the Trustees decided, as part of a strategic review, that a consultation paper will be published following ‘the increasing demand for global standards that provide comparable, decision-useful and auditable information to investors and other interested stakeholders’.