The economists, which include Angus Deaton, the current Nobel prize-winner for economics, Thomas Piketty, author of best-selling ‘Capital in the Twenty-First Century’, and former IMF economist Olivier Blanchard, urge the leaders to bring about an end to offshore financial secrecy.
The letter, coordinated by Oxfam, comes ahead of the UK government’s Anti-Corruption Summit in London on 12 May, which aims to step up global action to expose, punish and drive out corruption in all walks of life. Politicians from 40 countries as well as World Bank and IMF representatives are expected to attend.
Poor biggest losers
The economists argue that tax havens undermine a countries’ ability to collect taxes, with poor countries proportionally the biggest losers.
“The existence of tax havens does not add to overall global wealth or well-being; they serve no useful economic purpose. Whilst these jurisdictions undoubtedly benefit some rich individuals and multinational corporations, this benefit is at the expense of others, and they therefore serve to increase inequality,” the letter states.
The economists said they all agreed that “territories allowing assets to be hidden in shell companies or which encourage profits to be booked by companies that do no business there are distorting the working of the global economy”.
New global rules
To counter this, the economists call for governments to agree new global rules requiring companies to publicly report taxable activities in every country in which they operate, and to ensure all territories publicly disclose information about the real owners of companies and trusts.
In their letter the economists also recognise that the UK is uniquely placed to take a lead in ending offshore secrecy as it has sovereignty over around a third of the world’s tax havens through its overseas territories and crown dependencies.
They note that more than half of the companies set up by Mossack Fonseca, the law firm at the centre of the recent Panama Papers leak, were incorporated in British Overseas Territories, though in this case it was mainly the British Virgin Islands.
Revalations
The papers revealed that major banks are often central players in the creation of shell companies often in the British Virgin Islands (BVI), Panama, and other offshore tax havens.
The Panama Papers also revealed the existence of an offshore fund based in the Bahamas set up by the father of the UK prime minister which helped drive the Conservative leader to push forward with moves to tackle tax avoidance.
Since the leak Cameron has announced a new law which makes companies criminally liable for employees who aid tax evasion, and promised to set a public register of beneficial ownership of private companies.
He has also put pressure on all the crown dependencies and overseas territories to commit to providing UK law enforcement authorities with information about beneficial ownership, and announced that the government will use up to £10m ($14.1m, €12.4m) to set up a new cross agency task force to “swiftly analyse” and “take rapid action” on the millions of leaked documents.
