Wednesday, June 19, 2013

G8 and tax havens: a helpful beginning, but only a beginning

We haven't commented yet very much on the G8 outcomes - partly because most of us are travelling, partly because hordes of others are commenting, and partly because we wanted to sit back a bit and comment once we've had a bit of time to digest all the kerfuffle.

We think there's been some useful progress, most importantly on matters of principle and in terms of a serious shift in political will in our direction. A few years ago only a few crackpots (such as us) would have been calling for such things as:
  • G8 countries said they should make multinational corporations disclose the taxes they pay on a country-by-country basis. (FT.) Country by country reporting is now officially endorsed, at the highest level.
  • Tax authorities should automatically share information to fight evasion. This should be "the global standard." (FT.)
  • Companies should know who really owns them and tax collectors and law enforcers should be able to obtain this information easily. (statement
  • G8 countries have “a duty” to help developing countries improve their capacity to enforce tax laws.  (FTC)
These have all been core TJN campaign issues for some years now - and it's delightful to see world leaders now talking about this, and at least pushing for some action, even in such vague terms. All of this is several decades overdue, and the shift in the zeitgeist is hugely welcome. We are also pleased that the UK has exerted some leadership on this issue, as far as it goes. From The Guardian, on the corporate taxation side of it:
"The decision to try and lead the charge will provide a rare moment of unity at home – nowadays, everyone from UK Uncut to the crustiest of Tory backbenchers is keen to see companies stump up what they owe."
In an email to TJN, ActionAid said this:
"Twelve months ago, the idea of the G8 summit being dominated by tax dodging in developing countries would have been absurd. It simply wasn’t on the agenda."
And so we have seen big progress. But of course there are many big negatives out there. As the FT notes:
"The written statement is not short of what governments and companies “should” do. . . . But critics are not convinced. It lacks a clear promise on whether G8 members will follow through on these obligations and by when."
The Financial Transparency Coalition (FTC), of which TJN is a member, added:
"At this year’s summit, G8 leaders had an opportunity to pursue tax and transparency policies that would provide economic stability, root out systemic corruption and enhance the democratic process in rich and poor nations alike. Today G8 leaders largely failed to seize this opportunity."
Or, as Professor Prem Sikka put it:
"The G8 summit in Lough Erne was preceded by much hype and promises about action on tax avoidance and corporate secrecy, but it has delivered little. The leaders' communiqué commits governments to nothing more than vague promises.
. . .
the G8 has made no mention of any time scale for implementation. Neither does the communiqué say anything about how this information exchange is to be co-ordinated or enforced."
The FTC adds:
"there is no G8-wide agreement on the introduction of beneficial owner registries, let alone that they be made public."
And of course there are the pesky questions of detail. Such as:

How will places such as the Cayman Islands comply with this protocol when they do not levy income or corporate taxes, and thus do not have the infrastructure for collecting data about taxes or tax avoidance vehicles? And note that while there are indications of some willingness to "consider measures to facilitate access to company beneficial ownership information," there appears to be no intention to let the public know the details about ownership of companies, or beneficial ownership information with respect to trusts. No sign at all of any willingness to even consider the issue of secrecy-shrouded 'ownerless assets' - believed to add up to many trillions of dollars' worth, around the world.

And, from The Guardian:
"It looks very unlikely that any country will deliver on this promise – and even the UK is saying it will only be consulting on how to implement it and that's not good enough. If that's all that happens, tax evasion will continue at a cost to billions of people the world over – especially in developing countries."
So, all in all, lots and lots of hot air, very little in terms of specific progress - but some important progress on broad global targets that we should all be aiming for. That is worth a lot, despite the other disappointments. Sikka summarises well:
"The kindest thing that one could say about the G8 communiqué is that as a result of public anger, issues such as tax avoidance and corporate secrecy are on the political agenda. However, the summit has not delivered."
We could have made our blog headline far more negative - but today's blogger is in a good mood. And in any case, we're preparing ourselves for yet more disappointment from the OECD.

More commentary on all this, a bit later.

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