Civil society calls on European ministers to tackle the secrecy jurisdictions

Against a background of financial market crisis, rising food and energy prices, and an emerging economic depression that threatens the poorest and most vulnerable, the French Presidency of the European Union convened a special ministerial meeting in Bordeaux this week to discuss European Policy options. Hosted by former Prime Minister Alain Juppé, the meeting provided an almost unprecedented opportunity for civil society representatives to directly address the ministers, and they used this occasion to challenge ministers to tackle the systemic problems underlying the crisis, including secrecy jurisdictions, capital flight and tax evasion.

Addressing the ministers, Alex Wilks, director of the European Network on Debt and Development [EURODAD] said that

"money leaked through capital flight from developing to developed countries is an estimated 300 billion euros per year. This is an unforgiveable situation," he commented, "and European governments must immediately take action to regulate the many European tax havens."

Coming hard on the heels of the European Parliament Report issued last week, which also called for action to tackle capital flight and tax evasion, this message reinforces civil society's concern that European countries are still not acting strongly enough to rein in the activities of secrecy jurisdictions like Luxembourg, Ireland, Guernsey, Jersey and the Netherlands, all of which are used extensively by multinational companies to shift profits to dodge taxes in poorer countries.

Recalling the commitments made by world leaders at the International Summit on Finance for Development at Monterrey, Mexico, in 2002, Henri Rouillé d'Orfeuil, President of the French NGO network Coordination Sud, commented to ministers in Bordeaux:

"it is essential that at this time of crisis Europen looks for a way forward, and does not signal that it is walking away from its political commitments and abandoning developing countries."

European countries must urgently accept a responsibility for helping protect poorer countries from the current economic turmoil, which in large part can be traced back to lax regulation and the secretive facilities provided by European secrecy jurisdictions. We have previously written about the perfect storm of issues that now need to be remedied in the face of the catastrophic failures of de-regulated financial markets. All the more reason then for us to endorse what Alex and Henri said to the ministers in Bordeaux about the idea of holding a new Bretton Woods Conference to address these failures:

"a) We welcome the idea of having a new Bretton-Woods conference. This conference will need to address seismic flaws in the global financial system and as such must be allowed sufficient time and high level commitment to tackle serious systemic reform. Intergovernmental decision-making on the current financial crisis must take place within the UN system, maximising the opportunity of the UN Financing for Development summit. Among other issues to be addressed must be the introduction of a fair, transparent and independent sovereign debt workout mechanism."

Representing a wide coalition of European NGOs including the Tax Justice Network, Alex and Henri made three further specific recommendations to the ministers, calling for reforms of the European financial architecture which would benefit developing countries, particularly in the spheres of tackling capital flight and tax evasion:

"(b) The EU plays a major part in maintaining the secrecy jurisdictions (tax havens) through which developing countries lose an estimated € 350 billion a year in illicit capital flight. EU governments must systematically reform and regulate these jurisdictions, many of which are European. The Savings Tax Directive must be tightened up to force automatic exchange of information between all legal entities. The directive should progressively be extended to become a global regulation.

(c) As part of an aggressive drive against tax evasion the EU also has a responsibility to introduce other transparency measures, such as an accountancy standard for transnational companies to break down their accounts country by country.

(d) We also strongly call on the EU to give real teeth to intergovernmental work on reform of taxation, by supporting the upgrade of the UN committee of tax experts to the status of an intergovernmental body, and providing sufficient resources to undertake its task."

We feel like following each of these quotes with strings of exclamation marks (but, for tidiness' sake, we won't.) This is music to our ears. These are core TJN demands: they originated very substantially from us and it is most encouraging that they are now at the forefront of the development debate, despite resistance from some countries -- let's highlight again Britain, Australia, Canada and the US to the proposal to upgrade the UN Committee to intergovernmental status. No good reasons have been offered for this resistance, other than to retain the current highly unsatisfactory status quo.

We call upon European ministers to support the upgrade and to work hard to persuade their colleagues in Australia, Canada and Britain to back away from their disgraceful lobbying.

The Key Points for the meeting are available here, and the press release is here.