This year saw a great deal of progress on financial transparency. From the G20 Summit in St. Petersburg to 10 Downing Street, the world has committed to more transparency both in words and in actions. Specifically, the events of this year have shown the world is eager to cooperate on issues of transparency and there is significant momentum building for significant and sustainable change. Here’s a review of some of the big events in 2013.
Many of the developments in 2013 showed the world is more willing to cooperate on issues of transparency. At its heart, transparency requires cooperation. Financial opacity serves only the nation who implements. Transparency indicates a willingness to cooperate because it is fundamentally a reciprocal benefit.
This year’s G8 Summit in Lough Erne saw a number of important commitments from the world’s eight wealthiest economies. Specifically, the leaders of these nations agreed to work toward sharing “information automatically to fight the scourge of tax evasion” and that “multinationals should report to tax authorities what they pay where” with “comprehensive and relevant information on the financial position of multinationals… in a standardized format focusing on high level information on the global allocation of profits and taxes paid.”
In September, the G20 followed up on these commitments in St. Petersburg, promising to implement a system of automatic tax information exchange by 2015. These declarations show a level of seriousness and cooperation that we have not yet seen in the areas of tax and transparency.
As Kevin Packman, an attorney with Holland & Knight LLP, noted this year has seen increasing cooperation between nations on matters of tax, and, in particular, the willingness of the United States to reciprocate. John Harrington, a partner with Dentons, put it this way: “It’s fairly unusual that you see this, but it’s becoming more common as you see governments cooperate.”
Many events of 2013, while promising in their own rights, were also important to the extent they provide momentum toward a global systems of transparency. Transparency is only important to the extent that it is systemic – in today’s globalized world these systems are only as strong as our weakest links. Many of the events of 2013 are significant in their own right, but more importantly they have provided momentum toward global implementation of these policies.
In October, UK Prime Minister David Cameron promised to make information on the beneficial ownership of companies available on public registries. Given that phantom firms are a global problem we cannot expect the UK’s movement alone to change the underlying dynamics of dirty money flows.
In April, the governments of France, Germany, Italy, Spain, and the United Kingdom announced they will launch the first ever multinational system of automatic tax information exchange. Shortly afterwards, the government of the Czech Republic and Poland, followed by Belgium, the Netherlands, and Romania, also signed up.
In March the European Union issued a directive mandating full country-by-country reporting for the banking sector and committed to extend this directive to all sectors in May.
While these moves are important in their own rights, they are also significant insofar as they provide momentum for global systems of county-by-country reporting, public registries, and automatic tax information exchange. The actions of Prime Minister Cameron, the European Union, and other nations of Europe may inspire action in the EU, on this side of the Atlantic, and to low-income countries beyond the G20, creating momentum toward more transparency worldwide.
While there is significantly more work to do, 2013 has shown that the world is ready and eager for change. Not only have nations across the world committed to and begun to implement significant changes that will impede criminals’ ability to evade taxes, launder money, finance terrorism, and rob developing countries of much needed funds, but there is the momentum and the desire for more progress. I think we can say with confidence that 2013 was a year for transparency.
Disclaimer: Unless specifically stated to be the views of the Financial Transparency Coalition, the opinions expressed on this blog are solely the opinions of the individual blogger and are not necessarily those of the Financial Transparency Coalition.