Monday, April 06, 2009

Last week: a curate's egg - G20 and OECD

We've had a bit more time to reflect on the fast-moving events over the past week or so. In summary: through the G20 TJN's agenda made useful strides, though there were many inevitable disappointments for us of course too: for example, G20 countries were silent on corporate taxes and also on the issue of trusts; the tax avoidance industry - accountants and lawyers and so on - are left unscathed, at least directly. Still, there has been progress.

The promulgation of the OECD list has, by contrast, been on balance a highly negative development, despite having played a role in pushing some very dirty jurisdictions towards a modestly less dirty position. It is shameful that countries like Switzerland, Austria, Belgium and Luxembourg, OECD members, have been put in a section called "other financial centres" - a whitewash - when they continue to store hundreds of billions of dollars in criminally tax-evading money, not to mention the abusive tax-avoidance industries they foster. Not nearly good enough, OECD.

We recently wrote a long blog about the OECD setting itself up for failure, and we believe the points made here to remain largely valid. The list has all exonerated a number of very dirty jurisdictions, and partly exonerated a number of other very dirty jurisdictions. The list has, no doubt, pushed some jurisdictions in the direction of modestly better behaviour, but its flaws are huge.

Fortunately, the G20 final communiqué only "notes" the OECD's list. Unfortunately, the G20 countries which influence the way these things progress tend to default to the OECD on these issues. We are coming to the conclusion increasingly that the OECD is not the right forum for dealing with these issues, except for on a highly technical level, at times (they undoubtedly possess great expertise).

This is a political process. And on the political side, the OECD has demonstrated with this latest list that it is hopelessly captured by big interests, and incapable of acting objectively in this area.

We have a draft briefing paper that looks at some shortcomings of the OECD approach. Please read and comment, before we finalise it.

We also note this appalling letter provided by another blogger, which was sent by the OECD Secretary-General Angel Gurría to the Luxembourg Justice Minister a few weeks ago (which may not, given the fast-changing nature of the debate recently, reflect all current realities - but it gives a good idea.) It includes things such as:

"I can confirm that the OECD is not developing new criteria to identify tax havens . . from an OECD perspective, none of our Members qualify as tax havens under these criteria."


He adds:

"The OECD noted that a good indicator of progress was whether or not a jurisdiction has twelve or more agreements that meet the OECD standards. (this is referring to TIEAs - see here)

and

"meeting the internationally agreed standard on exchange of information requires only limited exceptions to bank secrecy rules and would not undermine the confidence of citizens in the protection of their privacy."

(On that latter point, see here)

Here's how Richard Murphy put it in his summary of the OECD's latest work:

"The criteria set by the OECD have created just about the biggest tax avoidance scheme ever known.

It’s not much credit to Jeffrey Owens (OECD head of tax) and his team at the OECD in Paris I’m afraid. They really have become just about the best friends the suppliers of corruption services have ever had. They should be hanging their heads in shame if they did not see this one coming. They got the 2000 process wrong. It looks like they’ve done it again."

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