OECD official optimistic G8 tax plans mark beginning of end to secret money

by Stella Dawson | https://twitter.com/stelladawson | Thomson Reuters Foundation
Wednesday, 19 June 2013 18:09 GMT

U.S. dollar bills are displayed in Toronto in this posed photo, March 26, 2008. REUTERS/Mark Blinch

Image Caption and Rights Information
OECD senior tax adviser Raffaele Russo talked about G8 crackdown on tax havens in a live online discussion hosted by Thomson Reuters Foundation

WASHINGTON (Thomson Reuters Foundation) – The days of secret money using tax havens and shell companies are numbered under new plans by G8 world leaders to share tax information across borders, a senior OECD official said on Wednesday. 

G8 leaders at their summit in Northern Ireland signed a sweeping 10-point pledge on Tuesday to combat money laundering and tax evasion. They also promised to draw up national action plans to share tax information, crack down on shell companies that hide the names of who truly owns assets, and to require companies to report earnings broken down by country.

The OECD plays a key role in how the plans are implemented. 

The moves are the strongest yet in world leaders’ four-year-old drive to reduce tax avoidance and plug holes in their public budgets, while also helping developing economies crack down on illicit finance and keeping revenues in their own countries.  

Raffaele Russo, senior adviser at the Organisation for Economic Cooperation and Development’s (OECD) Centre for Tax Policy, said in an online discussion hosted by trust.org that he was “optimistic” that real change is happening.

He added that setting up a system for countries to automatically share tax information so that authorities can track whether companies and individuals are abiding by tax rules could be a game changer. 

“When Auto Exchange of Information will be the standard and every jurisdiction will have to apply it, to me there is little doubt that hiding money will be close to impossible,” Russo said. 

The OECD, the Paris-based research group that assists in policy development for the Group of Eight and Group of 20 major industrialised and developing countries, was tasked by the G8 summit this week to develop a system for implementing the country-by-country reporting for corporations. OECD also is due to deliver a report and recommendations for cracking down on tax avoidance to G20 finance ministers in July. 

Some campaigners for financial transparency, however, complain that the G8 summit did not go far enough. 

“What the leaders still don’t seem to have grasped is that a large part of the problem is the secrecy that shrouds the movement of that money,” said Heather Lowe, legal counsel at the advocacy group Global Financial Integrity which campaigns for curtailing illicit financial flows to help developing countries. 

Still, she said countries have come a long way in the last few years in understanding the importance of the movement of illicit money around the world, and the declaration at the G8 summit demonstrates this progress. 

“Glass half full … the end of the beginning for tackling financial secrecy,” said Alex Cobham, analyst at the Center for Global Development, a Washington D.C.-based research group. 

Russo outlined the following steps that the OECD is taking to support the initiatives outlined by world leaders:   

  • Include a country-by-country reporting proposal as a core part of the action plan it delivers to the G20 finance ministers’ meeting in Moscow in July. “The devil is obviously in the details and we are paying attention to that as we speak,” he said.  
  • Four steps are required to make the automatic sharing of tax information a reality: enact broad legislative framework for countries to expand their networks of tax partners; select the legal basis for the exchange of tax information; adapt the scope of reporting and due diligence requirements and guidance; and develop compatible IT standards in order to share the data.
  • The OEDC is developing a proposed template for multi-national corporations to report their taxes broken down by country and the same format could be used across the jurisdictions in which they operate.  This would streamline the reporting process and allow tax authorities to assess the risk of abuse, he said.
  • Twenty countries have signed up so far in a pilot project for skill sharing and training in criminal tax issues and how to conduct effective financial investigations. Countries wishing to participate include Brazil, Cameroon, Costa Rica, Ghana, Guatemala, Kenya, South Africa, Tunisia, Uganda and Uruguay.
  • The OECD plans to launch by the end 2013 Tax Inspectors Without Borders, a kind of “dating agency” that will match requests from developing countries for practical assistance on tax audits with tax experts. The idea is to exchange knowledge and build skills worldwide on international tax issues.

“Optimistic? Yes, indeed,” Russo said of the progress that G8 countries are making in tackling tax evasion and avoidance.  

“Those complaining about the G8 outcomes sound like the manager of a football team who complains because his/her team only won 4-0, while it could have been 5-0,” he said.

Our Standards: The Thomson Reuters Trust Principles.