The OECD has claimed a “major step” in its bid to eradicate tax evasion through banking secrecy, saying it will soon add “teeth” to measures designed to ensure members deliver on promises to share financial data.
The organisation’s Global Forum on Transparency and Exchange of Information met in Mexico this week ahead of G20 summits in London and Pittsburgh.
At the end of the meeting, Angel Gurria, OECD Secretary General, spoke of a “revolution” in the campaign for global tax transparency.
He said the forum, whose membership numbers more than 90 countries, had agreed a number of measures, including a commitment to "put in place a robust monitoring process" to ensure members implement tax sharing systems designed to cut through banking secrecy laws.
Such a measure could be critical in encouraging states that have historically used their secrecy laws – Switzerland being a prime example – as a block against disclosing information, to cease doing so.
Gurria said a ‘Peer Review Group’ had been established to examine the legal and administrative framework in each jurisdiction and assess the practical implementation of OECD transparency standards.
However, the details of the “teeth” available to the OECD were not divulged, raising the prospect they may be no stronger than naming and shaming.
A lack of OECD enforcement powers has been the source of past criticism and is often cited as the reason for its previous lack of success in compelling tax havens to carry through their commitments on transparency.
However, there has undoubtedly been a shift in attitudes in the wake of the financial crisis, with tax havens and previously recalcitrant states queuing up to sign tax treaties. This has largely been attributed to the warnings from Western governments that failure to share tax information – and therefore assist tax evasion – would not longer be tolerated.
A report on monitoring progress will be issued by end of the year, said the OECD.
Gurria added: “What we are witnessing is nothing short of a revolution. By addressing the challenges posed by the dark side of the tax world, the campaign for global tax transparency is in full flow. We have equipped ourselves with the institutional means to continue the campaign. With the crisis, global public opinion’s expectations are high, their tolerance of non-compliance is zero and we must deliver.”
Other agreements at the forum included:
Extended Global Reach: to further expand its membership and to enshrine the principle that all members enjoy equal footing.
Faster Agreements: to speed up the process of negotiating and concluding information exchange agreements including exploring new multilateral avenues
Developing country assistance: to put in place a coordinated technical assistance program to assist smaller jurisdictions to implement the standards rapidly
The forum’s decisions will be reported to the G20 Finance ministers, who are meeting in London this week (4 and 5 September) and at the G20 Leaders Summit in Pittsburgh on 24 and 25 September.
The Global Forum on Transparency and Exchange of Information agreed to meet more regularly in order to drive through progress in global tax transparency and plans to convene again next year. The last meeting was in 2005 and since its inception in 2000 it has met only five times.
It was the forum that drafted the Model Agreement on Exchange of Information on Tax Matters, that is now the standard basis for bilateral tax agreements.
Since the London G20 meeting in April, at which global tax transparency was the chief topic of discussion, more than 50 new Tax Information Exchange Agreements (TIEAs) have been signed, doubling the total number inked in the nine preceding years.
