Taken together, our fresh analysis provides no clear black or white recommendation to any interested party as to whether or not it is a good idea to push for and ratify this Convention.

The introduction notes:

4. The Convention embodies various legal improvements over Tax Information Exchange Agreements (TIEAs). Its multilateral nature is an important improvement over the bilateral processes that dominate the field of cross-border information exchange. It is also much broader than TIEAs: it provides differing mechanisms for exchanging information (‘on request’, ‘spontaneous’ and ‘automatic’ information exchange) and allows for joint tax audits of multinational corporations. This may be particularly useful for developing countries struggling to untangle complex multi-jurisdictional tax structures.

5. The Convention nonetheless has major weaknesses: secrecy jurisdictions face little or no incentive to adhere to it, and it is unclear whether the Convention will require secrecy jurisdictions to obtain the information that needs to be exchanged. Current signatories (let alone those that have actually ratified it; see Annex A) exclude secrecy jurisdictions such as Switzerland, Luxembourg and the Cayman Islands. In addition, there are no mechanisms for assessing how well the Convention is performing in practice*, and consequently no evidence as to how well it performs.

These risks are particularly relevant for developing countries deciding whether to commit scarce resources to it. Furthermore, unlike recent guidance issued by the UN, there is no provision to allow wealthier countries to bear more of the costs involved in complying with the Convention. The Convention also fails to refer to the UN as an appropriate forum for advancing international tax cooperation and instead jealously guards this role for the OECD and for parties to the Convention.

Read more here.

This paper will be permanently available on our “Information Exchange” webpage and on our “Briefing Papers” page.

The drafting of this briefing was a team effort and the author wishes to thank Eurodad, Martin Hearson (Action Aid), Sarah Knott, David McNair (Christian Aid), Sol Picciotto, Nicholas Shaxson, and David Spencer for valuable contributions.

The amendment to the French-Swiss tax treaty was part of a global initiative to combat tax evasion. Since the end of the 1990s, the OECD has encouraged tax havens to exchange information with other countries on the basis of bilateral tax treaties, but until
2008 most tax havens declined to sign such treaties. During the financial crisis, the fight against tax evasion became a political priority in rich countries and the pressure on tax havens mounted. At the summit held in April 2009, G20 countries urged tax havens to sign at least 12 treaties under the threat of economic sanctions. Between the summit and the end of 2009, tax havens signed more than 300 treaties. This is the largest coordinated action against tax evasion the world has ever seen.

The effectiveness of the G20 tax haven crackdown is highly contested. A positive view asserts that treaties significantly raise the probability of detecting tax evasion and greatly improve tax collection (OECD, 2011). According to policy makers, “the era of bank secrecy is over” (G20, 2009). A negative view, on the contrary, asserts that the G20 initiative leaves considerable scope for bank secrecy and brings negligible benefits (Shaxson and Christensen, 2011). Whether the positive or the negative view is closer to reality is the question we address in this paper.

The other powerful statement to come out of the meeting in Cannes was from French President Nicholas Sarkozy, who had some very strong words for uncooperative low tax jurisdictions. Sarkozy intonated that a list of eleven uncooperative jurisdictions should be “excluded from the international community,” including: Barbados, Trinidad and Tobago, Antigua, Botswana, Brunei, Panama, Seychelles, Uruguay, Vanuatu, Switzerland and Liechtenstein. He added that a list of countries which do not conform to acceptable tax practices would be published at all future G20 summits. “We don’t want to have tax havens any more.” He said “Our message is very clear.”

Loud and clear, sir.

The countries on Sarkozy’s list have reacted with varying degrees of hostility, indigence, and feigned bewilderment. In Barbados, for instance, the Minister of Foreign Affairs and Foreign Trade Maxine McClean insisted that “Barbados is a low-tax jurisdiction…not a tax haven.” Well, sure, you can label it any way you want, but the fact remains that Barbados surrounds its banking sector with a shroud of obscurity and will not participate in automatic tax information exchange. And for the record, yes, it’s also a tax haven.

There were also reactions from some jurisdictions that did not appear on Sarkozy’s list. This included Isle of Man, a British Crown Dependency and a tax haven according to the OECD. Or if that’s not compelling enough evidence, see this eHow article, titled “How to Avoid Tax with an Isle of Man Bank Account.” That’s not a joke. Needless to say, Isle of Man felt a wash of relief when Sarkozy didn’t call its name. Chief Minister Alan Bell called the news a “major step forward,” noting the statement was “very good” for the Island’s reputation. Okay. Sure. It’s just not saying much when your definition of “very good” is “not being ostracized by the world community.”

It was Switzerland, however, that reacted the strongest and most indignant. A spokesman for the Swiss State Secretariat for International Financial Matters told the world that they “were very surprised and dissatisfied.” This year’s Swiss president, Micheline Calmy-Rey, called Sarkozy’s remarks “ungrounded” and hypothesized that Sarkozy must have “a problem with Switzerland.” Calmy-Rey added that she did not know what this problem could be.

Okay. What could that problem possibly be? Here’s a thought. Maybe it has something to do with your country helping citizens of other countries, like France, avoid and evade their taxes. But that’s just the first thought that sprung into my head. I guess it could be something else, too.

But last week Christian Aid welcomed the G20′s bold pronouncements on tax havens, financial transparency and development. President Sarkozy went as far as to say that havens that didn’t comply would be excluded from the international community. A whole programme of work on tax and development was agreed.

This was a major coup for organisations like Christian Aid and the Tax Justice Network that just three years ago were struggling to garner political support for these issues.

But haven’t we been here before? Back in 2009, the G20 declared ‘the era of banking secrecy is over.’ Yet this year the UK and Germany agreed to deals with Switzerland in lieu of tax from offshore account holders. Why didn’t the UK and Germany just get the information and pursue these individuals for what they owe? Banking secrecy, of course. It is alive and well. These deals, branded a disgrace by Christian Aid, were applauded by the Swiss bankers association for preserving their treasured ‘privacy’; read secrecy.

Meanwhile, the G20’s development working group took forward a piece of work on Domestic Resource Mobilisation – helping developing countries to raise their own taxes.

Of course the G20′s role is high level political statements and policy coordination. We shouldn’t expect it to deliver the world. But has it delivered anything?

Of course NGOs are always going to push for more. But are the G20 even following the advice they have requested from international experts? Last year the G20 asked intergovernmental organisations and international financial institutions to write a report. And the report is pretty good. It makes recommendations on exchange of information, transfer pricing, compliance of multinationals and capacity building for tax administrations – all important issues which we have been pushing.

Our scorecard compares the recommendations made, with what the G20 actually delivered. The scores that we attribute to the G20 simply evaluate their response to that expert opinion.

On this objective analysis of tax issues, the G20’s welcome political commitment has been translated to decisive action on only one of twelve suggested actions, while some tentative progress has been made on only three other issues.

‘Passes’

The G20 has urged Multinationals to improve transparency and full compliance with applicable tax laws. This sends a strong political message to Multinationals that tax dodging is no longer OK in developing countries and provides civil society and governments with the political backing to stand up to companies.

‘Could do better’

The G20 agreed on strong support for capacity building for designing and efficient managing of tax administrations and revenue systems. But they failed to commit any finance to make this a reality.

All G20 countries agreed to sign the Multilateral Convention on Mutual Administrative Assistance in Tax Matters – a tool to facilitate exchange of tax information – and have offered to exchange information automatically, although only on a voluntary basis. While this sends a strong signal that the crackdown on tax evasion is a priority, loopholes and caveats within the agreement mean that it could remain ineffective. We need evidence that this agreement is actually working and that secrecy jurisdictions will be strongly invited to participate before we know whether it is worth developing countries signing on. And of course, without tax havens signing on, it remains of limited value.

The G20 has encouraged International Organisations to strengthen their programmes to assist developing countries diagnose their transfer pricing legislative needs and adopt, and then effectively implement, transfer pricing rules. This is clearly something that many developing countries want and need in order to challenge the abusive transfer pricing which costs billions in lost revenue every year. But the G20 failed to commit any resources to this.

‘Failures’

The G20’s major opportunity lay in pressurising tax havens to share information with developing countries to live up to its 2009 commitments. This is a missed opportunity for the world’s leaders to take a leadership position and ensure that their commitment to ending banking secrecy is delivered.

The International Organisations suggested that the G20 look into the feasibility of making further improvements to the transparency in reporting tax information by MNEs taking into account existing regulatory proposals for the extractive industry developed by the US and EU. Yet the G20 failed to make recommendations on as issue which is already law in one G20 country and is likely to be implemented in many others across the EU very soon.

Similarly the report recommended that G20 countries disclose information on tax exemptions in their own countries thus showing a leadership position on transparency – a crucial tenet of tax reform – but this proved too difficult for the G20.

Finally, the International Organisations recommended G20 countries undertake an analysis of the impact of G20 countries’ tax policies on other countries. This is particularly relevant because corporate tax reform – such as the UK’s review of its controlled foreign company rules- could have a significant impact on developing countries by increasing the incentive for UK companies to shift taxable profits offshore. But again the G20 failed to act.

Next steps?

Not a great score this time – but the political momentum generated should not be underestimated. To have the G20 recognise the harmful impact of illicit capital flight and the importance of tax for development is a significant coup. Civil Society Organisations will keep pushing G20 countries to deliver on their commitments with concrete supporting actions. So as the road to Mexico begins, we shouldn’t be surprised if the voice of civil society and governments in both the North and the South becomes much stronger.

Back in September I was sitting in the salubrious office of an official from one of International Financial Institutions – when he slouched back in his chair, sighed and said ‘I can’t even bear to read those G20 communiqués – they are so vacuous.’ That evening, I found myself at a dinner hosted by DC law firm Jones Day where former Mexican President Zedillo branded the G20 ‘a disappointment.’

But last week Christian Aid welcomed the G20′s bold pronouncements on tax havens, financial transparency and development. President Sarkozy went as far as to say that havens that didn’t comply would be excluded from the international community. A whole programme of work on tax and development was agreed.

This was a major coup for organisations like Christian Aid and the Tax Justice Network that just three years ago were struggling to garner political support for these issues.

But haven’t we been here before? Back in 2009, the G20 declared ‘the era of banking secrecy is over.’ Yet this year the UK and Germany agreed to deals with Switzerland in lieu of tax from offshore account holders. Why didn’t the UK and Germany just get the information and pursue these individuals for what they owe? Banking secrecy, of course. It is alive and well. These deals, branded a disgrace by Christian Aid, were applauded by the Swiss bankers association for preserving their treasured ‘privacy’; read secrecy.

Meanwhile, the G20’s development working group took forward a piece of work on Domestic Resource Mobilisation – helping developing countries to raise their own taxes.

Of course the G20′s role is high level political statements and policy coordination. We shouldn’t expect it to deliver the world. But has it delivered anything?

Of course NGOs are always going to push for more. But are the G20 even following the advice they have requested from international experts? Last year the G20 asked intergovernmental organisations and international financial institutions to write a report. And the report is pretty good. It makes recommendations on exchange of information, transfer pricing, compliance of multinationals and capacity building for tax administrations – all important issues which we have been pushing.

Our scorecard compares the recommendations made, with what the G20 actually delivered. The scores that we attribute to the G20 simply evaluate their response to that expert opinion.

On this objective analysis of tax issues, the G20’s welcome political commitment has been translated to decisive action on only one of twelve suggested actions, while some tentative progress has been made on only three other issues.

‘Passes’

The G20 has urged Multinationals to improve transparency and full compliance with applicable tax laws. This sends a strong political message to Multinationals that tax dodging is no longer OK in developing countries and provides civil society and governments with the political backing to stand up to companies.

‘Could do better’

The G20 agreed on strong support for capacity building for designing and efficient managing of tax administrations and revenue systems. But they failed to commit any finance to make this a reality.

All G20 countries agreed to sign the Multilateral Convention on Mutual Administrative Assistance in Tax Matters – a tool to facilitate exchange of tax information – and have offered to exchange information automatically, although only on a voluntary basis. While this sends a strong signal that the crackdown on tax evasion is a priority, loopholes and caveats within the agreement mean that it could remain ineffective. We need evidence that this agreement is actually working and that secrecy jurisdictions will be strongly invited to participate before we know whether it is worth developing countries signing on. And of course, without tax havens signing on, it remains of limited value.

The G20 has encouraged International Organisations to strengthen their programmes to assist developing countries diagnose their transfer pricing legislative needs and adopt, and then effectively implement, transfer pricing rules. This is clearly something that many developing countries want and need in order to challenge the abusive transfer pricing which costs billions in lost revenue every year. But the G20 failed to commit any resources to this.

‘Failures’

The G20’s major opportunity lay in pressurising tax havens to share information with developing countries to live up to its 2009 commitments. This is a missed opportunity for the world’s leaders to take a leadership position and ensure that their commitment to ending banking secrecy is delivered.

The International Organisations suggested that the G20 look into the feasibility of making further improvements to the transparency in reporting tax information by MNEs taking into account existing regulatory proposals for the extractive industry developed by the US and EU. Yet the G20 failed to make recommendations on as issue which is already law in one G20 country and is likely to be implemented in many others across the EU very soon.

Similarly the report recommended that G20 countries disclose information on tax exemptions in their own countries thus showing a leadership position on transparency – a crucial tenet of tax reform – but this proved too difficult for the G20.

Finally, the International Organisations recommended G20 countries undertake an analysis of the impact of G20 countries’ tax policies on other countries. This is particularly relevant because corporate tax reform – such as the UK’s review of its controlled foreign company rules- could have a significant impact on developing countries by increasing the incentive for UK companies to shift taxable profits offshore. But again the G20 failed to act.

Next steps?

Not a great score this time – but the political momentum generated should not be underestimated. To have the G20 recognise the harmful impact of illicit capital flight and the importance of tax for development is a significant coup. Civil Society Organisations will keep pushing G20 countries to deliver on their commitments with concrete supporting actions. So as the road to Mexico begins, we shouldn’t be surprised if the voice of civil society and governments in both the North and the South becomes much stronger.

In case you’ve missed India’s catapult into this discussion, here’s the background.

In April of 2009, after becoming very upset by the evidence there are rivers of ‘black money’ flowing out of India, the president of the Bharatiya Janata Party (BJP), Rajnath Singh, told voters that if they elected his party into office he would, within 100 days, “bring back all the black money stashed in foreign banks and distribute [it] among ‘the common poor people.’” As we know, the BJP did not come to power inIndia in 2009 so fortunately for Rajnath Singh, his party never needed to prove this monumental task was possible. It’s not, by the way.

In the last two years there has been relentless pressure from Indian citizens and politicians on President Manomohan Singh to “bring it back;” a phrase which has become something of a common term in the world’s largest democracy. Unfortunately for India, this has proven to be a monumental—make that impossible—task.

The more important, and more effective, course of action is to stem the outflow in the first place. And in recent months India has significantly expanded its efforts in this area. To this end, India recently joined the Financial Action Task Force and the Task Force on Financial Integrity and Economic Development’s Partnership Panel. It has also completed negotiations for 16 new tax information exchange agreements (TIEAs) with mostly notorious tax havens, including: the Bahamas, the Isle of Man, the British Virgin Islands, Cayman Islands, Jersey, and Gibraltar.

Two weeks ago, I noted that while this was a step in the right direction “TIEAs are not nearly strong enough to allow for effective fight against tax evasion… [because] under TIEA requirements, tax information is only provided if another country specifically requests it.” I said what India really should pursue is automatic exchange of tax information and predicted that, “given the progress of the last two years, in the next two, we may see India on the forefront of the international arena, calling for automatic tax information exchange.”

Two years? Try two weeks.

On Thursday, at the G20 Summit in Cannes, Prime Minister Singh stood in front of the leaders of the world’s twenty most powerful countries and urged them to agree to automatic exchange of tax information. He said: “G-20 countries should take the lead in agreeing to automatic exchange of tax related information with each other, irrespective of artificial distinctions such as past or present, for tax evasion or tax fraud in the spirit of our London Summit that ‘the era of bank secrecy is over’.”

Unfortunately the G20 is not on the same intellectual fast-track that India is steering. As GFI noted in a recent press release: “While the final declaration mentioned automatic exchange of tax information as a potentially useful tool in tackling non cooperative jurisdictions, it stopped short of calling for its implementation—instead stating that they would ‘consider’ it “on a voluntary basis as appropriate.”

While this is, of course, a bit of a disappointment, we should remember Prime Minister Singh’s comments are a huge victory for transparency. This discussion will take time. As they say, Rome was not built in a day, and secrecy won’t be dismantled in that proverbial day, either. We must be patient in our pressure on the rest of the world as it catches up with the Indian thought leaders. But who knows? Maybe they’re not as far behind as it might seem. I’ve already underestimated the power of this idea once.

ProgressOhio/Flickr

Two prominent advocacy groups have released major reports last week exposing unsettling truths about bribery and tax dodging schemes among large corporations in the United States and around the world.  Berlin-based Transparency International published its annual Bribe Payers Index on Tuesday, ranking 28 countries on the perceived likelihood of bribery within their companies, followed only days later by the Corporate Tax Payers & Corporate Tax Dodgers 2008-2010 report by Citizens for Tax Justice and the Institute on Taxation and Economic Policy.

These reports might come as a windfall for Occupy demonstrators who have ramped up the scope of their protests by shutting down the nation’s fifth busiest port in Oakland, Calif. on Tuesday.

Even as prosecutions under the U.S. Foreign Corrupt Practices Act have produced record sentences in recent years, the United States’ bribery score according to Transparency International has remained stagnant since the organization first published the index in 2008, with many of Europe and Asia’s advanced economies scoring consistently higher.

Most inflammatory, however is the finding from the CTJ/ITEP report that 30 of the nation’s 280 largest corporations paid no federal taxes over the same period from 2008 to present, with 78 of them showing at least one of those years without taxes.  On paper, the federal tax code dictates that corporations pay 35% taxes on profits.  However, the existence of loopholes granting credits and refunds to large corporations has actually translated to net negative tax rates among several firms, for instance Pepco Holdings (-57.6% tax rate), General Electric (-45.3%), Verizon (-2.9%), and many more.

The corporations included in this latter survey collected total pretax profits of US$1.4 trillion while claiming US$223 billion in subsidies.  Company spokespersons for the biggest corporate tax dodgers insist that they have “have fulfilled all tax obligations to federal, state and local communities where we serve our customers.”  Yet, the fact that this behavior is legal is not in question.  The question is, as a recent post on this blog argues, not even whether this is fair, but if it can even be considered “decent”.

Despite considerable distraction out of Greece and the greater Eurozone, the G20 summit wrapped up in Cannes, France at the end of the week.  In the final communiqué, issued on Friday, the G20 leaders committed to promoting “social inclusion” and making “globalization serve the needs of the people”.  If protests around the world have not effectively communicated those needs, or at least a segment of them, then perhaps in combination with expanding research by civil society groups, our international leadership will be galvanized to stronger action.

Image License: Some rights reserved by Progress Ohio 

While the Eurocrisis took centre stage at the summit, a series of important developments in the campaign for tax justice that emerged at the same time went largely unremarked.

They clearly indicate, however, that awareness is growing in political echelons of the harmful impact of financial secrecy – a phenomenon that has given rise to what has been called ‘the ugliest chapter in global economic affairs since slavery’.

The developments include

• The G20 listing 11 tax havens that have failed to deliver on tax transparency. French President Nicolas Sarkozy said the worst offenders ‘will be excluded from the international community’.
• Every G20 member agreeing to sign a multilateral convention that will allow exchange of tax information between them – and will consider making information available automatically on a voluntary basis, the gold standard in information exchange between jurisdictions.
• A call from the G20 for multinational companies to be more compliant and transparent in their dealings with poor countries.
• Indian Prime Minister Manmohan Singh warning that tax evasion and illicit finance flows have become a ‘serious’ problem and urging the G20 to take a lead on automatic information exchange.
• British PM David Cameron calling for principles to govern matters such as tax transparency and anti-corruption in the global economy.
• The G20 agreeing to increase support to developing countries to counter ‘abusive transfer pricing ‘- a major profit-shifting tax dodge.
• A report from Bill Gates for the summit calling on all G20 countries to impose legally binding transparency requirements on mining and oil companies as exists now in America under the Dodd-Frank Act. Requiring companies to make public details of agreements they have with governments of the countries where they operate makes it easier to spot irregular payments. Gates also called for a ‘natural resource charter’ to bring more transparency into land, timber and other natural-resource related deals.

Christian Aid senior economic justice adviser Dr David McNair said as the summit ended: ‘Where once we had only rhetoric, we now have the first shoots of political will. That is a welcome new development.

‘But by itself, political will is not enough. Resources and follow up processes must now be made available to consign tax haven secrecy to history.

‘The situation that exists at present has been called the ugliest chapter in global economic affairs since slavery. That is not an exaggeration.

‘We estimate that developing countries lose around $160 billion a year because of tax dodging by multinationals and other companies trading internationally. That lost tax revenue could save lives.

Dr McNair was particularly critical of the G20’s failure to implement advice commissioned from leading international organisations on how developing countries could collect more revenue.

Strongly welcomed by Christian Aid, the joint report from the International Monetary Fund, World Bank, UN, and Organisation for Economic Co-Operation and Development demanded that G20 countries assessed the impact of their tax policies on the developing world. In particular, they were urged to disclose the tax incentives they offer multinationals.

‘The developments around the G20 are encouraging, but more pressure must be exerted to convince tax havens that the financial secrecy they offer in no longer viable. They must be persuaded to become more transparent, ‘said Dr McNair.

Christian Aid is part of the End Tax Haven Secrecy campaign which prior to the start of the summit delivered signatures from more than 40,000 people worldwide calling for tax reform to French President Nicolas Sarkozy.

‘We are delighted that the G20 has listened to the concerns of 40,000 people across the world calling for an End to Tax Haven Secrecy – but we need sustained follow-up action to ensure this becomes a reality. We hope the UK government takes this forward over the next year,’ said Dr McNair.

The campaign calls for changes in the way that companies are required to report their accounts, to ensure that multinational companies publish the taxes they pay and the profits they make in each country where they work. It also wants automatic exchange of tax information between countries globally.

End Tax Haven Secrecy is a global coalition involving 56 organisations in more than 20 countries.

Ends

Further information from Andrew Hogg on 0207 523 2058 or 07872 350534. 24 hour press duty phone – 07850 242950

Notes to Editors
1. Christian Aid works in some of the world’s poorest communities in nearly 50 countries. We act where the need is greatest, regardless of religion, helping people build the lives they deserve.
2. Christian Aid has a vision, an end to global poverty, and we believe that vision can become a reality. Our report, Poverty Over, explains what we believe needs to be done – and can be done – to end poverty. Details at http://www.christianaid.org.uk/Images/poverty-over-report.pdf
3. Christian Aid is a member of the ACT Alliance, a global coalition of 100 churches and church-related organisations that work together inhumanitarian assistance and development. Further details at http://www.actalliance.org
4. Follow Christian Aid’s newswire on Twitter: http://twitter.com/caid_newswire
5. For more information about the work of Christian Aid visit www.christianaid.org.uk

Andrew Hogg
News Editor/Campaigns Editor
( 00 44 (0) 207 523 2058 / 00 44 (0)7872 350534
* Christian Aid, 35 Lower Marsh, London SE1 7RL
7 00 44 (0) 207 620 0712
ahogg@christian-aid.org

“Governments around the globe are missing the funds necessary for promoting growth and combating poverty. But these funds haven’t vanished off the face of the Earth. They’ve simply been rerouted from public coffers to private pockets via aggressive tax dodging and grand corruption,” Raymond Baker, director of the Task Force on Financial Integrity and Economic Development commented today.

The OECD yesterday reported that a tougher crackdown on tax evasion could yield $100 billion with probably $1 trillion held illegally offshore.

“From Wall Street to the Acropolis people are voicing their anger on issues like job creation and pensions. Meanwhile, in poorer parts of the world people are worrying about the future of development aid for food and medicines. The G20 is taking slow steps forward but could still do more to tackle the endemic tax dodging and corruption that are keeping poor countries poor,” Baker continued.

The Task Force supports Indian Prime Minister Manmohan Singh, who during the meeting asked that the G20 take the lead on introducing automatic information exchange to herald a new era of transparent international financial relationships. It is unfortunate that G20 leaders didn’t heed his advice as the introduction of such a mechanism, in addition to welcome new anti-bribery measures in Indonesia, China and India could help bring about much needed transparency and go a long way towards ending the underlying problems of financial secrecy.

The Task Force is also encouraged that many jurisdictions are currently in the process of introducing “publish what you pay” mechanisms for the extractive industries. This will require companies to state the amount of tax they pay in each country where they work and would lessen the possibility of tax evasion or avoidance. We hope this measure will soon be adopted by all G20 countries and its scope broadened to include all industries and that they be required to report all profits, revenue, employee numbers and sales data.

The G20’s development working group recognised the link between poverty, illicit financial flows and secrecy jurisdictions. There was also an acknowledgement of existing work to encourage greater transparency in the tax affairs of major global companies.

We look forward to seeing more progress in the future by the G20 and other world leaders on implementing measures that shed light on who the beneficial (real) owners of companies are and that provide full disclosure on a company’s sales, profits, taxes paid and employee numbers in each country in which they do business”, Baker said. “The interests of rich and poor, developed and developing countries are all served by greater financial transparency and a clamp down on tax evasion.”

###

Contact:

Dietlind Lerner
dlerner@financialtaskforce.org
+1 202.577.3455

Nick Mathiason
nmathiason@financialtaskforce.org
+44 7799.3486.19

Summit Declaration Calls for More Work to Prevent Abuse of Corporate Vehicles

Global Financial Integrity

WASHINGTON, DC – Global Financial Integrity (GFI) praised the G20 today for its commitment to tackle the issue of illicit financial flows and crack down on tax haven secrecy.  In the final declaration and its appendices published at the conclusion of a two-day summit in Cannes, the 20 largest economies committed to “deal effectively with tax havens and non cooperative jurisdictions including the fight against illicit capital flows considering their impact on development.”

“We are thrilled to see the G20 taking the issue of illicit financial flows seriously,” said Raymond Baker, director of Global Financial Integrity.  “Secrecy jurisdictions provide a safe haven for the ill gotten gains of kleptocrats, criminals and tax evaders.  They destabilize the world economy, bankrupt developed and developing countries alike, and facilitate the financing of trafficking and terrorism.”

“Today’s declaration—and its Development Working Group appendix—significantly advance the discussion around these issues,” continued Baker. “Moving forward, however, the pressure on secrecy jurisdictions needs to increase, and a standard of automatic exchange of tax information between jurisdictions should be adopted.”

“We were disappointed G20 leaders didn’t heed the advice of Indian Prime Minister Manmohan Singh, who advocated in favor of automatic exchange of tax information during the summit,” added Baker. While the final declaration mentioned automatic exchange of tax information as a potentially useful tool in tackling non cooperative jurisdictions, it stopped short of calling for its implementation—instead stating that they would “consider” it “on a voluntary basis as appropriate and as provided for in the” Multilateral Convention on Mutual Administrative Assistance in Tax Matters.

Additionally, GFI was heartened by the G20’s comments on the abuse of corporate vehicles. In the final declaration, the G20 states that they “call on FATF and OECD to do further work to prevent misuse of corporate vehicles.”  The statement comes in the wake of a recent report from the Stolen Asset Recovery Initiative (StAR Initiative)—a partnership between the World Bank and the UN Office on Drugs and Crime (UNODC)—which documented how corporate vehicles are currently being abused by kleptocrats and called on world leaders to require the disclosure of the names of the beneficial owners of corporations, trusts and foundations upon formation.

“Criminals, tax evaders, and kleptocrats from around the world are taking advantage of corporate secrecy structures in the U.S. and elsewhere to hide and launder illicit money,” said Heather Lowe, GFI legal counsel & director of government affairs. “This financial opacity puts law enforcement at a major disadvantage. Too often cases are dropped, or investigations are closed, due to a lack of evidence connecting the illicit funds held in accounts owned by anonymous corporations to the criminal owners of those companies.”

“I am heartened that the G20 recognizes this as a major problem, and I look forward to working with FATF and OECD on this issue moving forward,” continued Lowe, who is currently collaborating with FATF on the review of its 40+9 recommendations.

For more information and to schedule interviews with Mr. Baker or Ms. Lowe, contact Clark Gascoigne at cgascoigne@gfintegrity.org or +1 202 293 0740 ext 222.

###

Notes to Editors:

1. Click here to download the G20 leaders’ communique, the declaration, and related appendices.
2. Click here to download the StAR Initiative report, The Puppet Masters: How the Corrupt Use Legal Structures to Hide Stolen Assets and What to Do About It.

Contact:

Clark Gascoigne
cgascoigne@gfintegrity.org
+1 202 293 0740 ext.222