Two years ago the Group of 20 leading nations declared that “the era of banking secrecy is over”. It mandated the OECD to lead an assault on tax havens. The results of this effort will interest those trying to track down missing wealth from Egypt and Libya, as well as governments chasing tax revenues amid large deficits more generally. Sadly, this was far from the dawn of a new era of financial transparency.
The OECD is supposed to develop rules to share information about their citizens’ income, so that they can be taxed appropriately. They planned to draw up black, grey and white lists of tax havens, with threats of sanctions against those that did not shape up. Tellingly, the black list was empty soon after their initial statement.
Part of the problem is that havens sign a Tax Information Exchange Agreement (TIAE) with other countries, under which they agree to share some information about people with accounts under their jurisdiction. But a country cannot use a TIEA to ask for general information about its citizens’ assets and income. Instead it must already know (and specify) who the tax cheat is, and what they are suspected of, to force the haven to act. This is better than nothing – but it does little to deter tax evaders.
Such illicit financial structures typically straddle many jurisdictions, perhaps with an offshore trust, a company with nominee directors, or bank secrecy adding opacity at each step. All are backed by skilled accountants, lawyers and bankers. But at the end of all these convoluted ownership structures, the actual assets will still be sitting in London, Zurich or New York.
© Financial Times
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