Is the OECD's new tax haven report a whitewash? No, but . . .
The four jurisdictions that have been subject to 'Phase 2 reviews' and have been judged non- compliant in the new report are Luxembourg, the British Virgin Islands, Cyprus and the Seychelles. It is important, and significant, that these rogue financial states are identified for what they are. Switzerland failed even to make it past the first stage of a two-stage assessment. FT journalist Vanessa Houlder, who tends to take a rather indulgent view of tax havens, commented:
"The ratings are an embarrassing setback for the financial centres and could expose them to a risk of blacklisting by tax authorities and development banks."Quite so. And this would serve them right.
There is plenty that one could say about this Global Forum process, and about the latest ratings. We see it, overall, as a Curate's Egg: some good, and some less so. Above all, we think that the standards by which jurisdictions are being judged are too lenient: based for political reasons on lowish common denominators.
In today's blog we will not get bogged down in detail, but instead will present a visual comparison.
Here is one of the pages from the Global Forum's new assessment table:
And now, carved from our recent Financial Secrecy Index, a table looking at the British jurisdictions which are striving so hard now to be seen to be squeaky clean:
That is a pretty different colour scheme. Ours is full of angry red ink - "wholly uncompliant" with the standards that we have set, while the OECD's is full of friendly green ink: OECD standards are 'in place.' (OK, we are comparing different jurisdictions here, but if you look at the whole OECD table, it is perfectly fair to make this comparison.)
So is this a case of whitewash (or, in this case, perhaps greenwash,) by the OECD? We wouldn't go quite that far - the Global Forum certainly has its place, and it has undoubtedly helped propel some positive changes. But we would say, loudly and clearly, that our standards are a whole lot higher than theirs.
And we make no apology whatsoever for that.
On a related matter, we've just been sent this article, from the Hindu Business line, an interview with Pascal Saint-Amans, tax boss at the OECD. Here is a key quote:
Which is, given what our Financial Secrecy Index shows, an outrageous thing to say. What would drive a senior official to say something like that, when he knows perfectly well that it isn't true?
Q: Does that means tax havens, as we have known them, are narrowing?
Pascal Saint Amans
PSA: It’s more than narrowing. It’s over.
Saint-Amans does, to be fair, qualify that 'over.' What he means to say, he continues, is that "they all committed to change."
So, to summarise crudely, tax havens are 'over' because they have promised to do better.
This is not just outrageous: it is dangerous, as illustrated by the headline of the very same article: "Tax havens are all but over." As a result of the mood music being stirred up by the OECD, the UK government, the IFC Forum, and many others, we get people regularly saying to us "well done - the problem has largely being solved."
No. It has not.
Or see this, just out from the International Consortium of Investigative Journalists (ICIJ.)
“Looks like the offshore party is over,” the Chicago Tribune said recently.Yes, we'd agree with that. And our index shows beyond doubt that this view is quite correct.
Will this time be different? Many financial crime fighters are skeptical.
"Rich nations’ latest promises to crack down on offshore centers are “a lot of bluster,” Donald Semesky, former financial crimes chief for the U.S. Drug Enforcement Administration, believes. “They all look good on paper, but they’re not real good in practice.”
Update 2014: for background and information on secrecy see here