Multinational Enterprises (MNEs) have been at the forefront of changes in the global economy over the last few decades, as trade and investment barriers have been removed and transportation and communication costs have declined. In a world of global value chains, understanding MNEs – where they are, how they operate, and where they pay taxes – has never been more important. However, surprisingly few official statistics are currently available on individual MNEs.
To fill this gap the OECD has begun to develop a new database – the Analytical Database on Individual Multinationals and Affiliates (ADIMA) – using a number of open “big data” sources that can provide new insights on individual MNEs and their global profiles.
2. What is ADIMA
ADIMA has four components:
– Physical Register: Offering a comprehensive view of each MNE and its subsidiaries.
– Digital Register: Showing all websites belonging to each MNE.
– Indicators: Providing harmonised data at the global level for each MNE.
– Monitor: Identifying events like large company restructurings that can give early warnings of potential significant impacts on trade, GDP and FDI data.
This information already covers 100 of the world’s largest MNEs, and more will be added in future releases.
In nutshell, this database contains public information on the physical and digital locations of the MNE, detailed financial and quantitative data (including revenue, profit, income tax and number of employees), and an indication of “events” such as large company restructurings. The database currently contains 100 of the largest publicly traded and not state-owned MNEs (by sales) in the world, with both more companies and data points expected to be added in future releases.
The OECD released the database in July 2019. It stated that the purpose of this database is to a provide a “whole view” of MNEs, including where they are located, how they operate and where they pay taxes. The OECD used several open big data sources to collect public information on individual MNEs and their global footprint. Sources include annual reports, various databases of websites, and other databases containing for example global news and geographic locations of shops and factories – going beyond what is generally available in company reports.
The ADIMA database currently covers 100 of the largest (by sales) publicly traded and not state-owned MNEs in the world, which in aggregate generated nearly US$10 trillion in revenues (almost 20% of the global gross domestic product (GDP)), earned $730 billion in profits and paid $185 billion in taxes. But you can also drill down and get more targeted information. For example, although the average Effective Tax Rate (ETR) of the ADIMA-100 was about 25%, it was significantly lower for MNEs producing computers and electronics, and pharmaceuticals, who have substantial intangible assets that they can locate in lower-tax economies
The new database includes information on both the physical and digital presence of MNEs by country. The OECD notes that the data shows that some companies serve markets without a local physical presence but through a digital presence. According to the OECD, this blurs the traditional line of trade within and across borders, thereby potentially affecting the comparability of international data on trade and national income.
The OECD announcement asserts that tax-related matters are one of the key items that can be analyzed through the ADIMA database. In this regard, the OECD notes that the data also shows an average effective tax rate (ETR) of the covered MNEs of about 25%, with significant deviations observed between industries.
The OECD has indicated that through the ADIMA database it aims to provide an international and “whole of the MNE” approach to measure the activities of MNEs. The OECD plans to collaborate with interested official statistical agencies to improve both national statistics on MNEs and the ADIMA data. These collaborations should expand its coverage of MNEs, improve its methods and incorporate new data sources, with an aim to include around 500 MNEs by 2020.
4. Concluding remarks
The development of the ADIMA database with its detailed and individualized data is an important development in the field of global transparency. For example, the differences in ETRs across industries could be used by the OECD and policymakers to argue for further changes in the international tax architecture, including the ongoing work of the OECD’s Inclusive Framework on addressing the tax challenges of digitalization of the economy.
MNEs should take this matter on urgent basis as the ADIMA database is intended as a statistical tool and hence, they should be aware of the information about them available in this database and their websites or other local filings and how this information aligns with the information that is required to be provided to the tax authorities (e.g., transfer pricing documentation and country-by-country reporting). Any mismatch would invite unintended scrutiny from the Tax authorities.