OECD Forum in Paris - helping taxpayers fight abuse?

The OECD forum on tax administration met in Paris on May 28-29. As happened last time in Cape Town, some pleasing results have emerged. And we had a colleague who attended the press conference, which produced some interesting results.

First, we note the OECD's press release contains some usefully strong statements, including the fact that government revenue bodies

"agreed to work together to increase the effectiveness of tax administration and to fight tax evasion and abusive tax avoidance, with special focus on banks, wealthy individuals and offshore tax non compliance."

This is the kind of language we need to see more of. And:

"High net worth individuals pose significant challenges to revenue bodies and to the integrity of tax systems because of the complexity of their affairs. Though potentially big tax-payers, they are wealthy enough to engage in tax planning which may enable them to avoid significant parts of their tax obligations."

Well said. Douglas H. Shulman, Commissioner of the US Internal Revenue Service (IRS) added:

“Individuals who hide assets overseas can expect an increasing number of revenue bodies to cooperate and share information to ensure people pay their fair share to help fund governments worldwide.”

Good. The OECD also publishes the headlines for a forthcoming report entitled Building Transparent Tax Compliance by Banks. This set of headlines contains too much to summarise here, but it does note the links between tax and what it calls "complex structured finance transactions" (CSFTs - much of the stuff that helped bring us the global economic crisis). The OECD notes that

"Banks pose a risk for tax administrations because they engage in tax avoidance on their own account provide schemes and shelters for others and fund aggressive tax planning."

And:

"Revenue bodies are concerned about CSFTs which lack transparency and have tax as a primary driver. They need to develop the necessary skills to better understand CSFTs and differentiate those that should be regarded as aggressive from a tax perspective. . . . Revenue bodies should . . seek to understand the legal context of CSFTs in their own jurisdiction to identify those transactions which pose a significant tax risk."

The details of these are not made available in these headlines; these links are still in the process of being understood and hopefully the forthcoming report will shed more light.

And, as with the last Forum in Cape Town, the OECD does seem to be paying attention to developing countries:

"Participants in the two-day meeting also discussed ways in which developed countries can help emerging economies to improve tax-collecting capacity and capabilities which will enhance the fiscal capacity of their governments."

Pravin Gordhan, South Africa's Finance Minister, added:

“Tax plays a fundamental role in development through mobilising revenue, promoting growth, reducing inequalities and reinforcing governments’ legitimacy, as well as achieving a fair sharing of the costs and benefits of globalisation."

More good stuff. Our colleague David McNair from Christian Aid who listened to the press conference online, paraphrased Gordhan as calling aggressive tax avoidance "a serious cancer eating into the fiscal base of many countries."

And on a separate issue, we are most heartened to see his brief meeting notes add this, quoting Dave Hartnett, the UK's Permanent Secretary for Tax:

"Growing recognition that C by C (Country by country reporting) brings additional transparency - particularly regarding how TNCs operate in emerging and developing economies. An idea which is gathering momentum and which we will, imagine, discuss more."

We have been highly critical of the OECD in several other areas, but this forum looks like a most useful exercise: credit where credit is due.