Dear Chancellor Merkel
10th May 2010
The German government is convening an international conference on financial market regulation on 19-20 May 2010 in Berlin in preparation for the upcoming G20 Summit in Toronto this June.
In view of the importance of this meeting in promoting a more stable, sustainable and inclusive global financial system, and the reiterated commitments of the G20 in favour of an equitable and inclusive global economy, we regret that the conference has not made provision for civil society participation. This is especially of concern since private sector representatives from the financial services industry have been invited to take part. We are greatly concerned that these representatives will use this opportunity to water down any regulation effort which may affect their way of doing business. In the interest of a new balance between, on the one hand private and corporate economic activity, and effective safeguards for global public interest on the other hand, we request that you reconsider this decision and open the conference for meaningful civil society participation.
Meanwhile we would like to draw your attention to the threat that the unresolved problem of uncooperative and non-transparent jurisdictions constitutes for the integrity of financial markets, this issue being high on the conference agenda. Many financial industry actors are attracted to non-transparent jurisdictions by the enormous profits that can be harvested in these places. They therefore have a strong vested interest in maintaining the current system. The shadow financial system makes it possible for them to generate considerable, and often un-taxed, profits while also concealing and redistributing the associated risks of these undertakings. Thus, it played a significant role in making the financial crisis possible as many financial institutions have been heavily affected by affiliates and special purpose vehicles placed in tax havens.
While partly recognising the risks of illicit and non-transparent financial activity, so far neither the G20 nor international bodies like the OECD and the FATF have succeeded in addressing this problem and eliminating or even containing these risks. On the contrary, we fear that this systemic threat will continue to put the integrity of global financial markets at risk while also impairing the fiscal space of governments in times when huge efforts are needed to overcome the economic crisis and to face common global tasks like poverty reduction and climate change mitigation and adaptation.
We therefore propose the following recommendations for discussion at the Berlin conference:
• Full disclosure of beneficial ownership and/or public registries of legal entities and their beneficial owners would make a powerful contribution to financial market transparency;
• In respect of transnational corporations, a country by country reporting standard would effectively complement efforts for transparency. The G20 should require the IASB to adopt this measure in response to the financial crisis;
• An international Code of Conduct on Cooperation in Combating International Tax Evasion and Avoidance (as was discussed at the recent session of the UN Committee of Experts on Cooperation in Tax Matters) would strengthen market integrity since it would mainly address institutional as well as jurisdictional provisions of financial secrecy;
• A decision should be taken on a timely and thorough assessment of envisaged FATF and OECD measures in order to examine their efficiency and effectiveness for providing the necessary transparency in financial markets, especially in respect of non-transparent jurisdictions that host offshore financial centres;
• The interest of developing countries should be taken especially into account since they are highly affected by illicit flows but lack the means of preventing them.
Please do not hesitate to ask for any further information about our recommendations and please count on our support if you require further explanation. We strongly urge that civil society should be invited to participate in the forthcoming deliberations in Berlin.
Georg Stoll, director TJN International Board
John Christensen, director TJN International Secretariat
On behalf of the members of the Tax Justice Network
- German Chancellor Angela Merkel;
- EU Commissioner Michel Barnier;
- Finance ministers of Argentina, Australia, Brazil, Canada, France and Germany;
- Central Bank governors of the G20;
- members of the German and European Parliament.