Tax evasion: Substantial progress but countries must keep up their efforts
19 April 2013
Posted by: Author: Angel Gurría
All of the world’s financial centres, under the impetus of the G20, and adopting the standards developed by the OECD, made a commitment in 2009 to putting an end to tax-motivated bank secrecy. Against the exceptional backdrop of today’s deep financial, fiscal and political crisis, there is no longer any excuse for tolerating tax evasion or aggressive tax avoidance.
Banner headlines should not overshadow the major strides that have been made, even if much still remains to be done. We did not wait for the latest revelations of Offshore Leaks to undertake far-reaching efforts in this area.
All financial centres in the world that had committed themselves, under pressure, to putting an end to bank secrecy have in fact kept their word. In addition to the "lists” published in 2009, the laws of all of the countries concerned have been scrutinised closely through "peer reviews”. The 120 countries of the Global Forum on Transparency and Exchange of Information for Tax Purposes are indeed assessed on the basis of precise and exacting criteria. The progress made has been substantial: all of the countries now consent to exchange bank information on request; over 900 bilateral agreements to exchange such information have been signed; and a great many opaque schemes have been dismantled.
And yet major progress must still be made, and hundreds of recommendations have already been formulated. Several countries such as Lichtenstein, whose legislation had been deemed insufficient, have amended their laws in response to these demands. Others have been invited to speed up their reforms as a prerequisite to more extensive review. Ultimately, the Global Forum will examine how each country has actually implemented exchange of information, and each country will be given an overall rating that will sanction its behaviour. An initial series of 50 ratings will be available this autumn, so that those that comply with the rules and those that do not can be identified clearly.
Like Luxembourg in recent days, a growing number of States nevertheless deem it advisable to go beyond the qualitative leap in transparency that was constituted by the exchange of bank information. Now the next step is to move on to automatic exchange of information. We are actively working to achieve this. The G20 countries have decided to be exemplary in this area, and the G8 have asked us to implement a multilateral platform whereby states can exchange information in a secure and effective manner. In order to satisfy the new requirements of the United States, under its Foreign Account Tax Compliance Act (FATCA), many countries, such as Switzerland recently, have signed agreements calling for far-reaching exchange. In co-ordination with the European Union, it is up to us to ensure the effectiveness of these agreements and to make them accessible to all interested parties.
Many countries, such as Saudi Arabia, Belize and Morocco, are preparing to sign the OECD multilateral Convention on Mutual Administrative Assistance in Tax Matters, which calls for all forms of exchange of information, and even for assistance in collecting unpaid taxes. Over 60 countries will then have joined in what is becoming the benchmark instrument for a more transparent world in which it will no longer be possible, tomorrow, to conceal one’s wealth or income so as to avoid tax.
In addition to tax evasion, we can no longer tolerate aggressive tax avoidance, which public opinion massively rejects. No country can stem this global scourge on its own. Collective and co-ordinated action by governments is essential.
Here too, the G20 has asked us to review international tax rules in order to put SMEs and multinationals on a level playing field. Combating the erosion of tax bases and the shifting of profit has become a priority now that taxpayers’ trust in the effectiveness and fairness of their tax systems depends on it. Eliminating double taxation of transnational investment is necessary for growth and employment. While this objective must be maintained, it is also necessary to do away with "double non-taxation” and the shifting of profits to tax-free jurisdictions where no real activity takes place. In July, I shall present the G20 with an Action Plan to put an end to such practices.
Lying at the core of the sovereignty of states, the acceptance of taxation must remain one of the cornerstones of our democracies. Today, this is threatened by insufficient co-operation between states, which has made massive evasion possible. It is also threatened by delays in tailoring our international tax rules to the globalisation of the economy and business enterprises. If we are to restore the confidence of our citizens and taxpayers, we must win the battle for transparency and the establishment of fairer global rules.