The European Parliament and the Council of Ministers have reached an agreement to introduce extensive new regulations for company accounts, including tighter transparency requirements for mining and energy firms.
The revision of the European Union’s (EU) accounting directive aims to simplify and partially harmonise accounting rules and bringing some into line with regulation in the US.
The most controversial aspect of the draft legislation is the imposition of transparency requirements on extraction industries. Groups representing mining, oil and natural gas companies have been engaged in a lobbying battle with transparency campaigners, who claim that the rules are the only way that people living in poor but resource-rich countries can hold their governments to account for the way they use money brought in by industry.
Michel Barnier, the European commissioner for the internal market, said that the agreement would show how “EU legislation can be a catalyst for change in developing countries”.
“The agreement will bring in a new era of transparency to an industry which is far too often shrouded in secrecy and help fight tax evasion and corruption as well as create the framework so both companies and governments can be held to account on the use of revenues from natural resources,” said Barnier.
The proposed legislation would require EU-listed or privately-owned companies involved in industries such as oil, gas, mining and logging to publish all payments over €100,000 they make to governments in all countries they operate in. The European Parliament wanted the transparency rules to go further and apply to more sectors, including the telecommunications and construction industry.
However EU member states resisted, on the basis that any extension would stray too far from the original scope of the legislation. Nonetheless, the compromise is still tougher than several member states envisaged as they wanted companies only to have to report what they have to pay to central governments and local authorities. Under the deal brokered they will have to break down figures on a project-by-project basis.
Much of the revised directive is aimed at cutting red tape for small businesses and making annual reports more comparable across the EU. An impact assessment carried out by the Commission estimated the legislation would save small and medium-sized enterprises (SMEs) €1.5bn a year.
Richard Bruton, the minister for jobs, enterprise and innovation in Ireland, which currently holds the presidency of the Council of Ministers, focused on this element of the legislation. “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.
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