The Guardian published an article yesterday on sanctions on tax havens to be proposed at the forthcoming G20 summit.

That article worried some of us. We felt it indicated that the G20 will not be going nearly far enough. So we sent the following letter to the Guardian, which was published this morning:

News of further detail on the G20 action against tax havens (Tax havens may face sanctions for not giving data on evaders, 2 March) does not make encouraging reading. As organisations and individuals who work for greater transparency, we welcome the discussion of effective sanctions against non-cooperative jurisdictions. However, your report implies that the G20 is setting the bar so low for "cooperation" that the possible impact is negligible.

The Tax Justice Network has estimated that some $255bn a year of revenues are lost due to tax havens. Christian Aid has estimated that developing countries alone lose $160bn in desperately needed revenues through a lack of transparency in the way multinational and other companies conduct international trade - and of course tax havens play a significant role in providing that lack of transparency.

You note that the G20 is creating a blacklist "from three overlapping groups of havens: those which still have no double taxation conventions, which allow nations to swap information on taxpayers in each other's jurisdiction; those which have refused to accept the idea of new Tax Information Exchange Agreements, which allow one nation to require another to dig out extra information on a suspect; and those which agreed in principle to TIEAs but have failed to sign them".

This approach assumes that TIEAs are effective, when the evidence shows they are anything but. First, those TIEAs which have been signed do not deliver. For example, the TIEA between Jersey and the US has seen the former provide information on just four occasions in four years. The burden of proof on the requesting party is so high that information exchange is extremely rare - even where the requesting party has the resources and commitment of the IRS. A developing country would have no chance. The second problem with TIEAs is that they are bilaterally negotiated, so while a haven may feel the need to negotiate one with a superpower like the US, they will simply ignore requests from developing countries - as has demonstrably been the case.

We need a global system for cooperation and information exchange in tax matters. This could be based on the existing OECD-Council of Europe convention of 1988 and the EU savings tax directive. States should operationalise the provisions for automatic information exchange in the 1988 convention and those such as the UK which have dependent territories should extend its provisions to them, since many of them are tax havens.

John Christenson Director, Tax Justice Network
Alex Cobham Policy manager, Christian Aid
Richard Murphy Director, Tax Research LLP
Professor Sol Picciotto Lancaster University
Anna Thomas ActionAid UK

It would be great to think that after the G20 the tax haven / secrecy jurisdiction issue will be resolved.

I know that won’t be true.

But we are moving in the right direction.