Big Oil’s demands to Keep Tax Payments Secret lead U.S. to Withdraw from Global Transparency Initiative
With the smell of indictments and corruption already stinking up the air, the Trump Administration added to the corporate lobby’s haul this year by announcing this week that it will no longer participate in the Extractive Industry Transparency Initiative (EITI), an international transparency initiative aimed at shining a light of extractive industry deals and exposing corruption.
Countries that sign up to EITI commit to publish the payments they receive from extractive companies, and extractive companies within their jurisdiction publish what they pay to the government. There are currently 52 EITI implementing countries that have gone through the multiyear validation process. The U.S. has supported the initiative since 2003, and in 2011, President Obama announced that as part of “our leadership of the global effort against corruption,” the U.S. would formally become an EITI candidate country to ensure “greater transparency so that taxpayers receive every dollar they’re due from the extraction of natural resources.”
Fast forward 6 years. Under the Trump administration, transparency is out, corruption is back.
The Interior Department, the agency in charge of US EITI implementation, announced this week that the U.S. will withdraw, effective immediately, claiming “domestic implementation of EITI does not fully account for the U.S. legal framework.” Translation: industry groups have spent years trying to undermine payment transparency, and the new administration has done everything it can to help them. It’s part of the broader trend. With the corporate lobby now in charge of the government agencies that are supposed to regulate corporate conduct and protect Americans, Big Oil is winning big. The first piece of legislation Trump signed was an expedited measure jammed through Congress to gut the Securities and Exchange Commission’s (SEC) extractive transparency and anti-corruption regulations. Put in place as part of the Cardin-Lugar provision of the 2010 Dodd-Frank Act, the rules required extractive companies listed on U.S. stock exchanges to publicly disclose project-level payments they make to foreign governments in all countries of operation and the U.S. federal government. (I’ve written at length about the outright, shameful lies told by industry and their allies in Congress to force through this measure, which I won’t go into again here.)
Chevron, Exxon and the American Petroleum Institute were the biggest opponents of the SEC transparency rules, yet all three are also members of the U.S. EITI multistakeholder group and Chevron and Exxon somehow managed to get themselves on the board of the U.S. EITI and the International EITI – roles that require good faith efforts to comply with the EITI standard. Their conduct, specifically intended to undermine EITI implementation, has been anything but good faith. Although central to the EITI standard, they’ve refused to disclose their federal income tax payments (hmm… sound like anyone else you know?). Chevron and Exxon said they would only disclose the payments when it was legally required by the SEC rules (which were set to take effect in 2018), while simultaneously lobbying to repeal those rules. While the SEC is still required to reissue disclosure rules eventually, without those rules in place now, the companies have continued to withhold their tax information – without which, the U.S. couldn’t pass its formal EITI review – and this administration has shown it’s more than willing to give them a pass.
The cynics among us probably don’t find it that surprising that big oil companies like Chevron and Exxon don’t want public scrutiny of their dealings with corrupt dictators – oil is a notoriously corrupt industry. But it’s worth looking at what exactly their concern might be in the U.S. context, which generally is assumed to be less corrupt than places like Equatorial Guinea and Russia.
The answer, as far as I can tell, is almost certainly a fear that the American public will see just how little they actually pay in federal income taxes, particularly now when Congress has revealed a massive tax plan that would disproportionately benefit multinational corporations and the super wealthy, while harming small businesses and many middle-class Americans. Multinational corporations frequently complain about the U.S. corporate income tax rate, and companies like Exxon like to claim they are “one of the largest taxpayers in the U.S. and around the world.” But the dirty little secret is that many companies – and especially fossil fuel companies – often manage to pay significantly less, and sometimes zero income tax, thanks to regulations, loops holes, and other tactics that enable them to reduce their tax burden.
Our friends at Publish What You Pay US (PWYP-US) have taken a look at the 2015 U.S. federal tax payments from the six multinational extractive companies that did make the full set of EITI disclosures. Two companies listed tax payments in the negative hundreds of millions of dollars and two listed tax payments as zero – only two companies disclosed positive amounts of tax payments.
And the fossil fuel industry benefits from a mind-blowing array of industry-specific subsidies in the U.S. A recent study calculated at least $15 billion in direct federal subsidies, and $5.8 billion in state-level incentives. That’s more than $20 billion each year in corporate handouts for fossil fuel extraction to some of the most profitable corporations in the world. Another study found that ExxonMobil alone was the beneficiary of $12.9 billion in tax subsidies between 2008 and 2015.
These numbers are staggering, and yet they appear to be one of the best-kept secrets from the average American.
The U.S. departure from the EITI may make it easier to keep those numbers secret in the short term, but this administration’s continued advancement of corporate profits and shady deals over the interests of ordinary people – not to mention its own seemingly corrupt dealings – has made it increasingly isolated on the international stage, and in the eyes of the general public, and at a certain point, companies may very well find that’s bad for business.
Senator Ben Cardin (D-MD) and former Senator Dick Lugar (R-IN), long time champions of extractive industry transparency efforts, summed up what happened well in their joint statement condemning the move:
The Department’s justification for withdrawing from EITI — because the initiative contravenes the U.S. legal framework — is a front meant to mask Big Oil and Gas’ money and influence, the real reason fueling this sad day in the movement toward greater global sunlight and transparency in extractive industries. There is no U.S. law that prevents oil, gas or mining companies from voluntarily disclosing their federal tax payments to the American people. The Trump Administration’s move today is a painful abdication of American leadership on transparency and good governance.’
The rest of the world has actively embraced the extractive industry transparency. Companies listed on stock exchanges in Canada, the United Kingdom and the rest of the European Union are already reporting their payments to all governments – including the U.S. – under mandatory disclosures rules in those jurisdictions modeled off of the SEC’s now-voided rule. Even state-owned Chinese and Russian companies, which are subject to those rules, are now more transparent than Exxon and Chevron.
So we need to keep asking: what is it Exxon and Chevron are so worried we’ll find?