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New OECD Against
Tax Havens and Countries that Have Excessive Bank Secrecy Laws
OECD efforts to improve transparency and stepping up exchange of
information in tax matters
Remarks by Angel Gurría, OECD Secretary-General
Conference on the Fight Against International
Tax Evasion and Avoidance: Improving transparency and stepping up exchange
of information in tax matters
Paris, France, 21 October 2008, published on OECD website
http://www.oecd.org
First let me congratulate Ministers Steinbrück and Woerth for taking this
initiative. This meeting takes place at a time when the issue of
international tax evasion is very high on the political agenda. When the G8
Heads of State met in Japan in July, they “urged all countries that have not
yet fully implemented the OECD standards of transparency and effective
exchange of information in tax matters to do so without further delay, and
encouraged the OECD to strengthen its work on tax evasion and report back in
2010.” It is also taking place during the most difficult economic times we
have faced in many decades.
The size of the problem
What do we know about the amounts of funds held offshore? The very
opaqueness of some of these jurisdictions makes it very difficult to get a
reliable estimate but we are pretty confident that it is big and growing,
somewhere between 5-7 trillion dollars. There are many reasons why
individuals and corporations go offshore (for example, to escape from
political instability in their home countries) but secrecy is also a driver.
How have Governments reacted?
We have seen reactions at two levels, first at the national and second at
the multilateral level.
1) National Level
Many countries around this table have over the last three years reinforced
their anti-abuse provisions:
Canada has developed a carrot and stick approach to entice countries to
exchange tax information.
Australia has denied benefits to residents of countries that do not exchange
information.
Italy imposes stricter rules on transactions with countries that do not
adhere to the OECD standards.
Mexico and Spain now impose more onerous requirements on transactions
involving entities in certain “listed” jurisdictions, but are prepared to
remove a jurisdiction from such a list if it has a tax information exchange
agreement (or double taxation conventions) in force with them.
The Nordic Council countries have managed to negotiate a number of
agreements by offering certain carrots but they have also indicated that
they will consider imposing defensive measures where necessary.
More broadly there are now at least half a dozen OECD countries that have
put comprehensive offshore compliance strategies in place, including strong
incentives for voluntary compliance. Some of these approaches have been more
successful than others, particularly in Ireland and UK. I’m sure that
Minister Mansergh and Financial Secretary Timms will tell us more.
2) Multilateral Approaches
We have seen multilateral action both at the level of EU (our colleagues
from France will probably expand on this) and at the level of the OECD.
The OECD work was initiated by G7 Finance Ministers in 1996. The intention
was to identify tax havens, list them, and apply countervailing measures
quickly, but tax havens persuaded us to move to a more co-operative
approach.
In 2000 we identified over 40 tax havens and between 2000 and 2005 we were
able to convince 35
of these tax havens to commit to the OECD standards of
transparency and exchange of information. Seven tax havens initially refused
to make this political commitment and were placed on a list of uncooperative
tax havens. By 2008 this list had been reduced to Andorra, Liechtenstein and
Monaco.
Also in 2000 the OECD launched a parallel project to improve access to
banking information for tax authorities within the OECD membership. We
agreed an ideal standard of access which all 30 Members endorsed. This
standard has now been widely implemented both within the OECD and beyond and
has been endorsed by the G8, the G20, the EU, and we hope it will be soon by
the UN. However, some countries have still not fully reached this standard.
We continue to work on both of these initiatives and are proud to say that
there have been interesting achievements. For example, Belgium now has a tax
treaty with the US which, for the first time, provides for exchange of bank
information for all tax purposes. This is a significant breakthrough.
Further, a total of 27 tax information exchange agreements have been signed
since 2000 and around 40 more are under negotiation. Most of the progress,
however, has been with just six offshore financial centres that are actively
negotiating agreements (Aruba, Bermuda, Isle of Man, Jersey, Guernsey and
Netherlands Antilles).
In October, a joint group of OECD countries and tax havens met in London,
under the Co-Chairmanship of Japan. They agreed to provide a more
transparent presentation of where 80 plus financial centres stand in
relation to effective exchange of information standards. They also proposed
that once a jurisdiction has passed a certain threshold, it could be
considered as having substantially implemented the OECD standard.
We also have put in place a mechanism to monitor progress - the annual
assessments of implementation of the standards we have developed, the latest
being published in September (I believe you all have a copy).
OECD has been undertaking exhaustive (and exhausting) studies on defensive
measures. We know what works and what doesn’t work and we have ideas on what
new measures could be taken.
It is now for you to decide how to create the political climate that will
convince the tax havens that have not implemented these standards to do so
and to do so quickly. Your political leadership is called upon to make
change happen.
What would this require?
1) First, as one of the outcomes from this meeting, you could give a mandate
to OECD to produce a methodology that would produce more reliable data on
the size of the problem, since this would provide a firmer footing for the
political debate.
2) Second, a clear political recognition being given to those offshore
financial centres that have made progress. The politicians in those
jurisdictions have taken a high political risk. You need to show them that
the choices that they made are the right ones and you may want to mention
them in your concluding statement.
3) We also need to clearly identify those tax havens that are not
implementing the standards, and to advance the agreement reached in October.
4) We need to intensify the exchange of experiences on what has been most
effective in protecting national revenue bases from offshore non-compliance.
5) I also believe that OECD countries may need to re-examine their tax
treaty policies towards countries that have refused to join the 80 plus
financial centres that have endorsed the OECD standards.
We at the OECD stand ready to work with you and other OECD and non-OECD
countries that are being affected by offshore non compliance. It is
important to recognize that this is a problem, not just for the rich
countries, but also for the poor countries of the world, as can be seen from
the fact that cross-border tax evasion will figure very prominently in the
debate in Doha in six weeks’ time.
More generally, if we are going to find a lasting solution to the current
financial crisis we need to ensure that there is debate between bank
regulators and tax authorities. Tax may not have been one of the main causes
of the crisis but I do believe it should be an integrated part of the
long-term solution. We cannot expect tax payers to fund the bailing out of
failed financial institutions and at the same time allow these institutions
to facilitate offshore non- compliance by using tax havens.
Transparency and integrity – core aspects of our tax work – will be critical
to rebuilding the financial architecture and sound tax policies will be
essential to revitalizing the global economy. The OECD stands ready to
assist you in tackling these substantial challenges.
Thank you!
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