Monday, February 14, 2011

Gordon Brown on exchange of information for tax purposes

Gordon Brown, Britain's former Prime Minister, has been interviewed for the Swiss newspaper, Tages Anzeiger, on the release of his recently published book: "Beyond the Crash: Overcoming the First Crisis of Globalisation", (or, translated from the German title: "What follows: How we create new growth worldwide".)

Gordon Brown said he tried harder than any other British politician to clamp down, and more, on tax haven abuse. Here we translate an except from the interview:

Gordon Brown observes:

"We have, today, a global financial system, but we do not have global supervision. And we have a globally interdependent world community, but we have no global coordination on growth."

The interview proceeds:

You want the banks to be better controlled with stronger supervision. The banks then threaten to relocate to other jurisdictions. How realistic are their plans?
"That confirms exactly what I say! We have global banks, global flows of capital, which are regulated by national authorities. That cannot function. Therefore financial centres such as Switzerland, London, Frankfurt, New York must coordinate on international regulation.

Financial Centres live for the banks. So how are they going to agree to this?
It seems to me, that the people who caused the financial crisis, should not now be advising us. That is the task of the elected governments, who must recognise: self regulation does not work. For global problems we need global solutions. The G-20 made a start in 2009 with tax havens - we stated that they must agree to exchange of information on tax matters for foreign bank clients. There were people who called in the middle of crucial meetings and warned us against a black list. Nevertheless, we have broken through that.

[TJN: who were these people who called? We are dying to know! Time for someone to spill the beans.]

Switzerland has finally agreed to the OECD's specifications for information exchanged on reasonable request. Is bank secrecy now reduced enough?
No one has done enough! If this information exchange is not effective, people will grab at more direct methods. It is best that we extend information exchange to the point that it truly functions.

You encourage Switzerland to engage in automatic exchange of information?
In the long term there will be a rebellion against financial centers that do not make the information voluntarily available.

Does that mean: you maintain that automatic information exchange is inevitable: yes or no?
Let go of the hair-splitting between "automatic" and "on demand". What we need is functioning information exchange!

Swiss bankers have blamed you for protecting London's financial center.
That is not true. The entire EU benefits from information exchange.

[TJN: what a non-sequitur!]

The British tax havens like the Channel Islands have not however been put in the pillory.
However these are now also covered by information exchange agreements. I was probably harder on tax havens and the whole tax avoidance industry than any other British politician. It is truly a sad sign of the times, that it can always be said, there could be a race to the bottom.

Gordon Brown is making nice noises, but the truth is he was rather gutless when he was in power. He definitely wasn't as hard on tax havens as, say, Vince Cable, or Lord Oakeshott, or a few others we could mention. Then again, they had the luxury of not having to implement this stuff.

We at TJN support the emerging consensus that the world needs to progress quickly away from the flawed OECD standards and towards much stronger and better forms of information exchange, notably "automatic" information exchange between jurisdiction, on a multilateral basis. See here for more details on all that.

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