Analyzing The Constraints Of The OECD Corporate Mediation Process On Tax Matters

tax notes Reporters Sarah Pease and Kiara Stroko discuss what they found in their search for an OECD-backed arbitration process for multinational corporations.

This transcript has been edited for length and clarity.

David D Stewart: Welcome to the podcast. I’m David Stewart, Editor-in-Chief Tax Notes Today International, This week: Multinational Arbitration.

Multinational corporate taxation and transparency have been a hot topic for more than a decade now. tax notes Reporters Kiara Stroko and Sarah Pease delve deeper into the recently established OECD dispute resolution mechanism and its role in tax. His story,Critics say OECD corporate arbitration is lacking in tax matters,” was published Jan. 25. We’ll hear from him about what he found in his investigation.

Kiara, Sara, welcome to the podcast.

Whole page: Thanks, Dave. it’s good to be back.

Kiarra Strocko: Thank you very much. happy to be here.

David D Stewart: Well, then why not start with an overview of what we are talking about here, the OECD guidelines and the dispute resolution mechanisms of this kind? What are they?

Whole page: Sure. The OECD Guidelines for Multinational Enterprises are basically a set of soft law standards. They are unenforceable, but they regulate multinational corporate behavior. These range from areas ranging from human rights and labor to the environment and especially taxation.

Basically how these work if any type of group, a federation or an individual, finds that any type of multinational corporation has violated these guidelines, they can be fined for violating any chapter of the guidelines A complaint can be filed against a corporation for what is called a specific instance. – There are 10 chapters – each with one of 51 national contact points. They are participating countries in these multinational guidelines.

So basically what happens is that these national contact points take up the complaint if they think it’s deserving, and then they consider the request for mediation. They will work with the company and the person or group who filed the complaint to resolve the issue.

David D Stewart: What exactly are they trying to do by using soft law here?

Whole page: Well, it looks like the OECD and the countries that are involved in this specific instance complaint process that deals with the guidelines are trying to hold multinational corporations to a certain standard, whether that be a higher human rights standard for their supply chains. or a high labor standard for its employees. Then in the vein of taxation, this actually leads to companies not practicing tax avoidance and basically following the spirit of the law, not just the letter of the law.

David D Stewart: Kiara, how did this issue hit your radar?

Kiarra Strocko: Yes. Sarah and I both went to the Investigative Reporters and Editors Journalism Conference in Denver in June 2022, and one of the panels we went to was led by individuals from Open Secrets, a nonprofit that focuses on campaign finance. and tracks data on lobbying. They went into detail during the panel on how to search for filings under FARA, which is the Foreign Agents Registration Act.

Basically, some agents of foreign principles engaged in political activities are required to make these periodic disclosures of their relationships, activities, receipts or disbursements. From there, Sarah and I became intensely interested in oil and gas companies and their spending related to foreign lobbying in Congress. As they say, the money followed.

Then somehow we stumbled upon a complaint brought against Chevron on the OECD’s database of specific examples, and we were shocked to see how many big-name companies were involved in these tax-related cases, especially well-known ones. Wasn’t Among others, the companies that stuck with us were Starbucks, Airbnb, and PlusPetrol.

David D Stewart: OK, so let’s get to the Chevron case. Can you tell us what this case is about and what happened during the proceedings?

Whole page: yes of course. So basically in 2018, a coalition of trade unions and non-governmental organizations filed a complaint with the Dutch NCP, which is based within the Ministry of Foreign Affairs, against the oil and gas multinational Chevron. They were alleging that the company had violated multinational guidelines by concealing information about relying on Dutch subsidiaries, which were operating as shell companies, in what they called a tax avoidance scheme.

They basically said that Chevron hid tax-related information about its use of 14 shell companies established in the Netherlands, which allegedly evaded taxes through non-payment of corporate and dividend withholding taxes in countries such as Nigeria and Venezuela. was used to facilitate escape.

Basically, what these groups were claiming was that they didn’t get this information. So not only was Chevron violating the taxation guidelines for multinational corporations, but they were also actually violating the Disclosure Guidelines, which say that multinational corporations must disclose certain financial and other information to the public.

David D Stewart: Ok. And what happened during the proceedings?

Whole page: We heard from both the sides. We interviewed people who were involved in pursuing the complaint, and we also interviewed a spokeswoman for Chevron. And we were able to interview someone who worked in the Dutch NCP.

We learned that, according to Chevron, they had received this invitation from the Dutch NCP to join the arbitration process based on this complaint. Chevron said it worked with the Dutch NCP for about three years, answering their questions and going back and forth with them, and at the end of that three years decided to exit the arbitration process because it felt it had issues. As a result of this complaint, certain things are being disclosed to the public which they did not want to be disclosed. They felt it was unfair.

Then he also mentioned that there was a conflict of interest issue within the Dutch NCP. The Dutch NCP is composed of four experts. They are one of the relevant stakeholder groups that will be involved in the MNE Guidelines. So it’s business, one from NGOs, one from trade unions, and one from academia. The president of the NCP whom Chevron was alleging had a conflict of interest actually worked for one of the groups that brought the complaint, the FNV, which is a trade union. Of course, she is no longer a part of it, but they were saying that they had a problem with the fact that she had previously been in that group.

But of course, we heard from people who came with complaints and even the person we spoke to within the Dutch NCP used to act like this. They need someone who is representative of the trade unions, who has actually reached a point in their career where they are considered an expert. And of course, the president had served in a number of different capacities. He didn’t just work with this one organization, and of course, they have representatives from other areas as well. So anyway, it was interesting to hear some of what we heard from all concerned groups involved in this complaint process.

But Chevron pulled out, and the Dutch NCP released their final statement and basically acknowledged what they were able to glean from the publicly available information — they said, “Yes, the complaint is quite fair.” ,” and they issued some recommendations for Chevron to increase transparency and conform to OECD multinational guidelines that they found had violated.

David D Stewart: So Chevron withdrew from the process, but has they done anything to respond to the panel’s recommendations?

Whole page: What can we say, not really. Of course, Chevron has told us that they comply with all tax laws in the countries in which they operate. But in November, the social justice nonprofit Oxfam International actually put out a report saying that there are many oil and gas companies, including Chevron, that continue to practice covert tax practices and that these companies, including Chevron, have established independent global Repeated requests to disclose tax details in line with the Standards of Reporting Initiative have been ignored. That report was released in November of 2022, so even five years later, it appears that Chevron is still not disclosing information up to the standards countries would like to see.

David D Stewart: Since this is all happening in the Netherlands, have we heard anything from the Dutch government about this?

Whole page: Well, we haven’t heard anything about it from official government ministries. However, the Dutch NCP, while they are a…