These were the slides I used for a talk to tax officials from Norway, Sweden, Finland, Denmark and Greenland this morning:
The Transition to Transparency
Nearly eight years since I spoke to you last: what has happened?
- A global financial crisis
- The end of tax havens (Gordon Brown)
- Tax Information Exchange Agreements
- The rise of the tax campaigner
- BEPS
- Country-by-country reporting
- FATCA
- Multilateral information exchange
Have we been on a transition to transparency?
- I hate to be a pessimist…..
Appearances are not everything
- Progress has not been smooth
- And has been marked by frequent failure
- Requiring new policy initiatives
The result is
- I think are there are significant remaining impediments to progress
- And much still needs to be done
Remember the world in 2008?
We were:
- Looking over an economic cliff the size of which we could not comprehend
- Still living in an era where a little voluntary cooperation was seen as the only solution to tax haven abuse
- And the European Savings Tax Directive was the frontier of innovation
And
- People like me were trouble making outsiders who many were all too happy to dismiss
The tax world has changed
I hope we can agree on that.
But:
- My point though is not to describe what has changed
- But to suggest a theory of change
- And to look at what this implies
The theory
- Change on this issue has always been incremental
- Each change, so far, has failed
- But in each change there has been a feedback loop, usually (to date) via the OECD
- And the combination of failure and feedback has, so far, resulted in a fairly rapid process of further change
- But so far it has not delivered success
- And I suggest that this pattern has some way to go as yet
- And the feedback loop may need to change before we get there
April 2009 - the changes
- The aim was to blame someone 'elsewhere' for what was happening on politician's home turf
- Tax havens were easy targets
- The OECD lists appeared like action
- But a target of 12 TIEAs was laughable
- And the truth was that TIEAs could not work, as a matter of fact
- This was politics, but not tax transparency
April 2009 - the failures
- TIEAs were mocked
- The black list was closed in days, and the grey list not long after
- The peer reviews convinced no one
- Occupy and UK Uncut made clear that this was not just an issue of evasion, but of avoidance as well
- The Google story went round the world
- The UK parliament made Google, Amazon and Starbucks totemic
The 2012 / 13 changes
- BEPS began in 2012
- David Cameron put it on top of the G8 agenda in 2013
- He accepted that this was a development issue
- Norway's patient funding of that argument paid off
- Country-by-country reporting topped the demands
- The Lough Erne Summit was the campaigners hey-day
The 2012 / 13 failures
- Developing countries largely excluded from the debate
- And from the data
- CBCR will exist, behind closed doors
- ‘Tax transparency, in secret'
- ‘Trust us, we're transparent: you just can't see it'
- Many other technical solutions are half hearted
- Arm's length pricing survives
- Corporation tax remains in its death throes
- There is no political solution for corporation tax in sight
The FATCA changes
- The US rocks the boat with FATCA in 2010
- BUT it is unilateral
- Most jurisdictions holding out against EU STD development smell the coffee and begin information exchange
- Even Luxembourg
- Austria would have been the last to fall
- The UK and others move to what I called ‘son of FATCA' deals with its havens
- The opportunity for the OECD to create proper multilateral information exchange to replace the bilateral era
The FATCA failures
- The US refuses multilateral exchange
- And becomes the biggest tax haven in the world
- The U.K. demands transparency from its tax havens
- And does not get it
- There is massive resistance to registers of beneficial ownership which are the pre-requisite of the system working
- And places like the UK will produce sham registers
- The likelihood of meaningful data exchange on the tax non-compliant is very low
- The Panama Papers imply only the fools will be caught
The ongoing crisis
- There is a tax gap
- But most countries will not calculate it
- There is a revenue authority resources crisis
- But few countries will acknowledge it
- There is a crisis in company law enforcement
- And no one even talks about it
- The accounting profession still produces accounts wholly unsuitable as a basis for tax
- And get away with it
- Which means we are still 'just dancing in the dark'
- Bruce Springsteen
So what is needed?
- Political will
- Investment of resources
- Tax
- Company law
- Substantially enhanced domestic information exchange regimes
- Massively enhanced tax accounting
- Public CBCR
- Tax Reporting Standards to identify the tax base
- Full transparency on all companies and trusts
- The training to use the data
- Vitally
Why will we get change?
- The next financial crisis will make this happen
- Coming your way soon….
- It's overdue
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USA is the biggest tax haven . And will not change.
Griffin ( City of London ) is second– very close behind. Ditto .
Lux and Switz still ” players” . Monaco still under the radar.
Singapore /Hong Kong /Macau making swift headway on the rails the latter two with Chinese blessing.
Things will never really viscerally change. A stable haven will always exist for those with sufficiently deep pockets to pay the accountants ( your profession) to find it.
NATURE ABHORS A VACUUM –WHICH IT QUICKLY PROCEEDS TO FILL
I disagree: this issue can be resolved
And will be, eventually
Nearly spilt my tea when I read Bruce Springsteen as glory days was on the radio.
Excellent
Norway, Sweden, Finland etc.,
All eminently sensible and serious Western countries in my opinion.
Oh well……………….