The G8 agenda
The transparency summit
Britain’s leader envisages a world of tax compliance and clear corporate ownership. The obstacles have become a bit less daunting
Jun 15th 2013 |From the print edition
AT FIRST blush, David Cameron seems an unlikely foe of tax dodgers and their accomplices. Conservatives are traditionally friendly to the wealthy and to big business, who gain most from fancy financial footwork. The City of London enjoys symbiosis with a cluster of offshore dependencies—including Jersey and the British Virgin Islands (BVI)—which have a reputation for, at best, inviting tax avoidance and, at worst, aiding financial crime. But as chair of the summit of the G8 (the biggest industrialised countries) being held in Northern Ireland next week, the prime minister will push for global reform of the world economy’s most shadowy corners. He wants to improve tax compliance through the cross-border exchange of information, to improve those data by making companies, trusts and the like show their true owners, and to change outdated rules which multinationals exploit to cut their tax bills. His assault is both on the offshore tax havens and on the often dodgier, if less well-known, practices in onshore jurisdictions such as Delaware—or London. Cynics will say this is nothing new. John F. Kennedy tried in vain to rein in tax havens in the 1960s. In the late 1990s the Organisation for Economic Co-operation and Development (OECD), a Paris-based club of rich countries, had a go but was foiled by America, which said low tax rates were a form of healthy competition. European leaders declared war on tax havens at a G20 summit in 2009 but had to retreat when China, whose wealthy citizens are big users of Hong Kong and Caribbean offshore financial centres, objected. Mr Cameron may fare better. Since 2009 tax havens and financial secrecy have become deeply unpopular with both the public and policymakers. A furore over corporate-tax avoidance in Britain has ensnared high-street brands, such as Apple and Starbucks. A series of leaks, notably 260 gigabytes of data on clients of trust companies in Singapore and the BVI to the International Consortium of Investigative Journalists, led tax authorities in several countries to open investigations. Breaking glass
Campaigners for transparency are in full cry. They have been “dictating the script lately”, complains Richard Hay, counsel to the IFC Forum, a lobby group for offshore lawyers: “Cameron has been reading from it.” Ernst & Young, an accounting firm, talks of a “tipping point”. The British agenda is ambitious. It includes everything from curbing the legal avoidance of corporate taxes to the use of anonymous shell companies to hide corruptly obtained public assets, evade sanctions and launder drug money. A refreshing whiff of candour is in the air. “Instead of preaching to poor countries or promising to double aid, which we never did anyway, the idea now is for the G8 to put its own house in order, in ways that are good for us and also good for Africa,” says Paul Collier of Oxford University, who has been advising Mr Cameron. “The days of ‘do as we say and not as we do’ are over.” Instead of increasing inflows through aid, the new approach is to curb the often bigger outflows from poor countries—whether from the illegal siphoning of the proceeds of corruption or the legal shifting of corporate profits by mispricing internal transactions. If you include those outflows, Africa would have been a net creditor to the rest of the world in 1980-2009, to the tune of up to $1.35 trillion, according to the African Development Bank and Global Financial Integrity, a campaigning group. Rich countries will have to change a lot, starting with the creaking system of international corporate taxation, which dates from an era when companies’ main assets were immovable. Now accountants can shuffle intangible assets such as intellectual property, and the profits they...
Please join StudyMode to read the full document