Tax Research UK

Developing nations asked to join tax exchange | UK | Reuters .

The UK government said on Tuesday it had asked developing nations to swap information to crack down on tax avoidance, ahead of a financial crime conference on Wednesday.

Treasury minister Stephen Timms wrote to 16 countries, including Jamaica, Cameroon, South Africa and Vietnam with the aim of setting up a multilateral tax information exchange involving Britain by the end of the year.

Stephen Timms is certainly making his mark in all the right ways.

This one is another step towards multilateral automatic information exchange .

Richard Murphy TIEAs

Attiya Waris of Tax Justice Network is addressing the OECD meeting. She says there are seven key words in tax:

1. Transparency
2. Accountability
3. Responsibility
4. True
5. Fair
6. Efficient
7. Effective

She says changes tax is changing. In Kenya indirect tax does not create tax awareness, and it can’t work because it is dependent on literacy. This breaks down the link between state and society.

Direct taxes have to create this. This is done by allocating tax to community level so local choice can be made on how to use revenues. This also means accountability rises and transparency and responsibility with it. This is bottom up change.

Now she says it is time for the OECD to deliver a top down delivery of data. But this will not happen or be useful if the IMF and World Bank undermine direct taxation systems by promoting VAT.

She says the MNC claiming it pays tax is OK – but they can’t substitute for local tax relationships to build accountability. They shouldn’t be claiming they’re good people for paying tax – it is their obligation.

And finally she argues for multilateral information exchange to allow bilateral deals to work. Until developing countries have enough data to make bilateral requests the Tax Information Exchange Agreements programme will be stalled in its effectiveness. This is at the core of information exchange issues, as I’ve argued for some time.

Richard Murphy OECD, TIEAs, Tax Justice Network

Tax-Haven Crackdown ‘Big Success’ as OECD Begins Review Process - Bloomberg.com.

As Bloomberg notes:

Cracking down on tax havens has been “one of the big success stories” of the Group of 20’s efforts in the financial crisis, the OECD said, as the Group shifts from naming-and-shaming to ensuring compliance with tax standards.

The Paris-based Organization for Economic Cooperation and Development said 195 tax-information exchange agreements were signed last year as countries faced fresh scrutiny from the G- 20, up from 23 in 2008. Nineteen countries that had been branded as not sufficiently meeting international standards were removed from that category on the OECD’s so-called gray list.

Well, if big is relative and better then the nothing the OECD achieved from 2002 to 2008 then this is correct.

But it’s a very, very long way from a major success.

As I’ve noted time and again the Tax Information Exchange Agreements the OECD promotes can only be useful if there is also automatic information exchange  to provide the ’smoking gun’ proof that a person is undoubtedly the beneficial ownership of a financial structure in another jurisdiction. Without that the number of requests under TIEAs will be miniscule - hundreds maybe a year - and that has not deterrent effect.

Second, saying that signing 12 such agreements is enough to establish international acceptability is ludicrous. There are more than 12 countries in the G20 for a start, 27 are in the EU, there are over 230 tax jurisdictions in the world (some say slightly more). Why 12?

The goal has to be comprehensive coverage of Tax Information Exchange Agreements which can only eventually be achieved on a multilateral basis and full automatic information exchange  on the beneficial ownership (for now) of all offshore structures (where offshore simply means ownership is one jurisdiction but the transaction is recorded in another) with in the long term income and other data all exchanged as well.

Then we beat tax fraud for good.

And other fraud.

And money laundering.

And a great deal of crime.

And corporate corruption.

And bribery.

And why would anyone be opposed to that?

The OECD needs to be brave: it’s horizons are too limited. Now is the time for it to break out and go for real reform.

Richard Murphy TIEA, TIEAs

I’m in Brussels talking about automatic information exchange today (and country-by-country reporting tomorrow).

It’s interesting to hear someone (I don’t think I can or should name him) close to the OECD Global Forum review group on information exchange saying that they are well aware that places like Monaco are taking the Mickey when seeking to appear internationally compliant with OECD standards by signing almost all their Tax Information Exchange Agreements with other tax havens.

And they say these places will fail the review process.

I hope they’re top of the pile for that reason.

Richard Murphy OECD, TIEAs

While we rail at MPs, the City gets away with murder | Nick Cohen | Comment is free | The Observer .

Nick Cohen refers to yours truly in the Observer:

A year ago, the world seemed willing to tackle the secrecy of the tax havens that hid so many of the bubble’s catastrophic deals. All we have ended up with is tinkering. The OECD’s recent Tax Information Exchange Agreements do nothing to identify the beneficial owners of trusts and companies run through the Channel Islands, Caribbean, Monaco and Lichtenstein. As Richard Murphy of Tax Research UK says, they provide the illusion of reform rather than the real thing.

And as he notes:

They are not alone in that. Mervyn King, once regarded as an establishment man, is arguing for a British Glass-Steagall Act to protect public money by separating high street banks from the casino operations of investment banks. Instead of seizing the chance for change, Gordon Brown and Alistair Darling – who are Labour politicians, in case you have forgotten – are fighting him all the way.

What a waste of a crisis.

Richard Murphy TIEAs, Tax Havens

This from page 10 of the Foot report:

It is anticipated that standards in this area will continue to rise and even those of the nine jurisdictions within the scope of this Review that have met or exceeded the current standard of 12 TIEAs should continue to enter further agreements with relevant countries. This imperative is well understood and it is appropriate that the commitment to tax transparency shown by a number of the jurisdictions has been recognised in statements by the UK Government.

The nine jurisdictions must show a commitment not just to the letter but also the spirit of international standards. Effective implementation will be an important test of this and evidence will be provided by the OECD’s Global Forum through a monitoring and peer review process. It is vital that competitor jurisdictions show the same commitment.

In the longer term, the trend for greater transparency is likely to result in pressure to move to a system of automatic exchange of information with the aim of combating tax evasion by individuals on a cross-border basis.

I think that a hint that he thinks automatic information exchange is on its way – but not just yet.

It’s also clear indication he accepts Tax Information Exchange Agreements do not work.

We’ll keep the pressure on them.

Richard Murphy Secrecy jurisdictions, TIEAs, Tax Havens

Switzerland’s Last Day As A Tax Haven - Forbes.com.

Forbes says this is so becasue it now has 12 tax information exchange agreements or double tax agreements.

As a result the OECD says it is ‘internationally compliant’ and no longer a tax haven.

Which shows how inadequate is the OECD standard and how daft is the definition of a tax haven.

But take comfort: it remains a secrecy jurisdiction.

Secrecy jurisdictions are places that intentionally create regulation for the primary benefit and use of those not resident in their geographical domain. That regulation is designed to undermine the legislation or regulation of another jurisdiction. To facilitate its use secrecy jurisdictions also create a deliberate, legally backed veil of secrecy that ensures that those from outside the jurisdiction making use of its regulation cannot be identified to be doing so.

Richard Murphy Secrecy jurisdictions, Switzerland, TIEAs

Marty Sullivan of Tax Analysts is speaking at the Task Force. He has said:

1. Full and automatic exchange of tax information must be our standard. We must make clear on request data is not good enough.
2. Tax Information Exchange Agreements are not glass half full offerings – they just about damp the glass. The OECD is not helping by claiming these things are a success – they are saying we are making progress without solving any of the real issues.
3. There are unstable and corrupt governments. So they have to be taken out of the system. But they’re the exception not the norm.

I agree.

Richard Murphy TIEAs

The Tax Justice Network has produced a draft briefing paper on Tax Information Exchange Agreements, the flaws within them and how they can be rectified.

I recommend it.

Richard Murphy OECD, Secrecy jurisdictions, TIEAs, Tax Havens