Le Monde on the Historic accord reached by the OECD on Combatting Tax Evasion

6 May

http://www.lemonde.fr/economie/article/2014/05/06/vers-la-fin-du-secret-bancaire-en-suisse-et-a-singapour_4411897_3234.html

(link to original article, above)

History, or at least economic history, will remember vividly this date: Tuesday 6 May 2014, the day when Switzerland and Singapore both agreed to cooperate on a way of automatically exchanging banking information for tax purposes, from state to state, embraced by the G20 powers to combat fraud.

According to our information, this surprising announcement had to be made in Paris, at the revelation of a ministerial reunion of the Organisation of Economic Cooperation and Development (OECD), a forum for international debate and action.

OFFICIAL DECLARATION

After intense diplomatic wrangling, the two countries had to sign an official declaration committing them to make the automatic exchange, a measure supported by more than 40 countries of which 32 were OECD members, -vbut also G20 countries which were not OECD members, including China and Russia.

tax dodger

tax dodger

The announcement of the ‘surrender’ by Switzerland and Singapore, countries whose economy is build on the financial industry and inviolable secret banking, and which have for a long time resisted any change, must be seen as a major advance in the struggle against tax evasion and fraud internationally.

It is a strong political signal, signifying that these states no longer want undeclared accounts. In fact, the automatic exchange of banking customer information is considered the most effective weapon against the concealment of capital. And with the capitulation of Switzerland and Singapore, the two strongest bastions of secret banking will fall, and what is more, the five of the biggest financial centres on the planet (after London, New York and Hong Kong).

To put it simply, the official practice of exchanging data on demand will be substituted, from 2017 onward, for a system of exchanging what is actually demanded, not one which clams up in the face of inquiries by the tax authorities or the law, and works according to the will of the states being interrogated, – therefore very badly.

END TO OPACITY

Within the designs of the OECD, in its single world standard presented to the directors of the G20 in February, the future accords on exchange of information are all-encompassing, in order that states will exchange all the information which appertains to the financial assets retained on their territory by an individual or a society: balance of bank accounts, interests and projected dividends or event financial products. All the financial institutions will have to comply with the new rules of disclosure.

In theory therefore – and on condition that this commitment to practising information exchange will be transformed into law and enforced to the letter, and on condition also that the information will be available on demand from the source – an act of fraud would no longer have anywhere to hide.

There would be no more possibility of interposing between you and the authorities kilometres, oceans, intermediary opaque structures. In practice, considering the ingeniousness of tax fraud perpetrators and of certain tax experts, we should say that the places to hide will become less and less numerous, indeed very rare.

FORTY COOPERATING COUNTRIES

In total, in the world, there are more than 40 countries which have committed to legislate on the automatic exchange of data, including all the major world financial centres, which are obliged to extend the measures to their offshore satellites: Jersey and Guernsey have said they will comply when the day comes, like the Canaans, the Isle of Man, Antigua, the Virgin Islands…

In addition to Switzerland and Singapore, other countries have joined the concert of nations, such as Austria, Malaysia and Saudi Arabia.

Inconceivable five years ago, much of the pressure for progress originated with the United States, resolved to recover fiscal revenue in a context of budgetary shortfall, and thanks to the determination of the OECD directors, determined to confront a subject that has been in their sights since the 1960s. The revelations of the Offshore Leaks in 2013, the great fraud scandals like the Cahuzac affair in France, did the rest.

The OECD has profited from the American law FATCA, intended to obtain from foreign countries data on Americans wherever in the world they are, in enforcing this international information exchange standard. Five European countries, the self-described G5, supported the measure from its launch: France, Germany, the UK, Spain and Italy.

SYMBOLIC BUT BINDING

Simultaneously symbolic and binding, Tuesday’s declaration must be followed closely by action to enforce it. Effective political accords must be signed between states, without doubt this autumn by France and its G5 partners, at the reunion from the 28-29 October, in Berlin, of the world forum on the transparency of information exchange for fiscal ends (according to an OECD directive)

Then, the technical panel, after having developed its famous world exchange directive, the OECD experts have to deliver the information standard which allows for the collection of proprietary info from the banks, then exchange it with foreign countries (encryption of information, documentation format). This could be carried out from June onwards, ready for a presentation to the directors of the great powers of the G20 in Brisbane the next 14-15 november.

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