Tuesday, November 10, 2009

UN corruption talks must consider tax havens: FT

A conference has begun in Doha, Qatar, involving the 141 signatory countries to the UN Convention against Corruption (UNCAC,) to decide whether to adopt a review mechanism that would give the treaty teeth. Most conference delegates seem to be unaware of the elephant in the room, but at least the Financial Times has noticed it:

"Corruption is a symbiotic affair. Not only recipients of bribes benefit from bribery; so too do bribe payers – often rich-country companies. Despite a recent crackdown on tax havens, ill-gotten gains still get a warm welcome in global financial centres. The World Bank cites estimates putting illicit financial flows – including bribes, profits from criminal activities and tax evasion – at a staggering $1,000bn a year, half of which comes from low- and middle-income countries."

It is worth noting that the FT also got one particular point right: they spoke about "illicit flows," not "illicit outflows," as a recent G20 statement, and many others, have put it. (The profound importance of this seemingly arcane point is explained here.) And the FT adds, very appropriately, that

"States gain advantages from keeping standards lax or unenforced; some base their entire economy largely on skimming the cream of illicit flows."

Well said. Helping to point out these obvious but oft-ignored facts was one of the key points of our recent Financial Secrecy Index.


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