Firms are keen on self regulation. They claim it works because they are transparent, accountable and good corporate citizens. In March, Rio Tinto released a voluntary report called Taxes paid in 2011, which showed the amount of tax that Rio Tinto paid worldwide. Rio was upfront in its press release on why it had produced the report:
This report demonstrates that effective disclosures can be made by businesses on a voluntary basis, in a similar fashion to what has been achieved in the area of sustainable development reporting, and that there is no need for additional legislation.
The report showed in a Table called “Our tax payments in 2011” that it paid in total $6.7 billion in tax to Australian Federal and State Governments. But how good was the report in demonstrating “that effective disclosures can be made by business on a voluntary basis”?
Well, based on that Table you might mistakenly believe that $6.7 billion was how much Rio Tinto paid in tax. But you would be wrong. The figure actually includes both taxes that Rio had to pay and taxes collected by Rio. Taxes collected included $880 million in PAYE tax.
That is, Rio included the taxes paid by its employees. That’s a pretty nifty way to inflate the company’s figures.
The $6.7 billion also included just over $2 billion in royalties. Royalties are not taxes but rather payment to the owners of the minerals (i.e. the government on behalf of us) for the minerals that Rio Tinto has extracted. Counting royalties as taxes is a bit like counting postage costs to Australia Post as taxes.
If we take out the taxes paid by employees and the royalty payments, the $6.7 billion Rio Tinto claims slumps to $3.75 billion. If this is Rio Tinto’s attempts to convince us that further legislation is not needed in sustainable development reporting then we’re unconvinced. In describing its report Rio Tinto goes on to say:
In a number of areas, including sustainable development reporting, voluntary transparency has been shown to encourage innovation in reporting.
Innovative reporting indeed.