Are tax havens disappearing? Yes, but this is only the beginning
Pascal Saint-Amans, Director of the OECD Centre for Tax Policy and Administration, replies to Christian Chavagneux’s article.
Christian Chavagneux is right to criticise tax havens and argues that more needs to be done to combat their negative consequences for developed and developing countries alike. But it’s wrong to imply that the G20’s actions have been ineffective since it pledged to tackle the issue in 2009.
The study he quotes by Johansen and Zucman on whether bank secrecy has ended actually answers another question, namely the effect of the G20 push for tax information exchange on the location of bank deposits. The location of the deposits themselves is not the issue – funds do not need to be repatriated to a country in order to be taxed by that country. What is important, and what the G20 initiative focuses on, is making the existence and ownership of those deposits more transparent to tax authorities.
The information exchange agreements signed since 2009 are only now beginning to enter into force, and the expansion of each country’s network of agreements is continuing. Even so, an OECD survey of 20 rich and poor countries showed that early measures to deter tax evasion have already resulted in 100,000 individuals paying a total of $14bn in unpaid tax on assets worth between $120-150bn.
We now have commitments by all the major international financial centres to eliminate bank secrecy for tax purposes. In most cases, including Switzerland, Singapore and Austria and Liechtenstein, those commitments have already been implemented.
Nor are governments abandoning the fight on tax havens as Christian Chavagneux suggests, including on automatic exchange of information. In 2011, the updated multilateral Convention on Mutual Administrative in Tax Matters entered into force and now has 33 signatories including Costa Rica, France, Georgia, Germany, Indonesia, Norway, Russia, the UK and the USA. The Convention looks beyond mere information exchange on request, allowing parties to engage in automatic exchange as well as international assistance for tax collection. In November 2011, we saw the G20 support automatic exchange of information as appropriate.
In February 2012, the Financial Action Task Force refined its criteria for assessing anti-money laundering frameworks, with more targeted requirements that will improve transparency. That same month, the US proposal to implement the Foreign Accounts Tax Compliance Act led to the UK, France, Italy, Spain and Germany agreeing to explore a common approach to improved reporting of bank transactions. These changes will lead to stronger domestic frameworks to ensure all relevant information is available, and tax authorities relying on broader networks of information exchange agreements can expect to benefit from these developments.
The Global Forum on Transparency and Exchange of Information for Tax Purposes already has 107 members and continues to expand its membership to cover emerging financial centres. By the next G20 Summit in Mexico in June, the Forum will have published more than 70 Phase 1 country reviews, while the Phase 2 reviews commenced in 2012 provide for an in-depth investigation into the procedures and resources available, to make sure that each jurisdiction can meet their commitments to the international standard.
The role of governments is primordial of course, but we also recognise the efforts of civil society in continuing to draw attention to the issue of tax transparency. That is why OECD initiatives like the Taskforce on Tax and Development are bringing together tax authorities, business and civil society to share proposals to move towards our common goal of fairer taxation.
Tax havens have been around since the late 19th or early 20th centuries, depending on how you define them. They are defended by powerful vested interests and the fight against them will not be won quickly or easily. However, combined with new OECD projects to strengthen inter-agency cooperation to tackle tax crimes and other financial crimes, there is good reason to be optimistic that we will continue to build on the substantial progress made since 2009.
The outcomes of the 59 country reviews published so far by the Global Forum are available on the Exchange of tax Information (EOI) portal along with an interactive map showing the network of agreements to exchange tax information: