A recent conference at Wilton Park addressed the largely neglected issue of domestic resource mobilisation in Sub-Saharan Africa. Tax Justice Network argues that domestic resource mobilisation should be the core of development strategies for most countries, but common sense has been in scarce supply in recent decades, largely pushed to one side to make way for the tax-cutting and privatising agenda of big companies and the western governments who serve their interests. So this conference was a welcome event, and we are pleased to report that the outcome document is now available online here.
Domestic resource mobilisation refers to giving priority to making efficient use of the savings and investments of households, domestic companies and local and national governments. It stands in contrast to the excessive focus on trying to attract external investment (known in the development jargon as Foreign Direct Investment) which must be lured into the country by a combination of tax breaks, subsidies and lax regulation. Needless to say domestic resource mobilisation carries a number of significant advantages, not least since it is more likely to serve the needs of local populations and less likely to engage in aggressive tax avoidance. Also, unlike foreign aid (another source of external investment) it doesn’t involve undemocratic interference in decision-making processes.
Recently we blogged our rather harsh response to the OECD’s claim that its deeply flawed information exchange standard is “universally endorsed.” As if any more evidence were needed in support of our argument, see this in India’s Economic Times.
India will pitch for deeper tax information exchange agreements at the G-20 to make such pacts more effective in facilitating the flow of crucial data on tax evasion.
New Delhi is expected to present a detailed paper on the issue at the forthcoming Seoul meeting, urging that domestic laws of countries must support such agreements for effective information exchange. “These agreements should ensure that there is actual flow of information and benefits for countries entering them (agreements) in checking evasion,” said a finance ministry official privy to the discussions.
A French language economic magazine is reporting that the forthcoming OECD Global Forum peer review (see note below) evaluation of Monaco – due next month – will make unhappy reading for those who think this secrecy jurisdiction and others have mended their ways.
According to this article in Challenges, the Principality will be in the line of fire over the lack of depth of its tax information exchange treaty network, and its continued lack of transparency over beneficial ownership.
Initially included on the OECD’s 2009 ‘grey’ list of secrecy jurisdictions, Monaco rushed to sign up to the minimum of 12 tax information exchange agreements. Much to the OECD’s embarrassment, however, many of these agreements involved other secrecy jurisdictions, including Liechtenstein, San Marino and the Bahamas. To date Monaco has not signed agreements with either Italy or the UK, both of which states are reckoned to lose significant revenues to Monegasque tax evasion structures.
British Prime Minister, David Cameron, has announced the appointment of Kenneth Clarke as the Cabinet member who will champion Britain’s anti-corruption efforts.
The appointment of such a prominent politician comes at a time when Britain’s international reputation remains badly tarnished by issues including the festering BAE Systems scandal, politically embarrassing connections to the attempted coup in Equatorial Guinea, London’s prominence as a tax haven, and the malignant role of London’s satellites in encouraging and facilitating corrupt practices.
Britain’s report card reveals systemic deficiencies and calls for urgent political action. All too often, however, Britain plays a blocking role in trying to water down international efforts to tackle corrupt practices. This has included past attempts to water down the European Union’s Savings Tax Directive to exclude trusts and other legal entities used extensively for tax evasion, not to mention warning foreign governments against probing too deeply into deals involving British companies.
Brazil’s ministry of finance has published a list of jurisdictions or dependencies that we would call secrecy jurisdictions. The accompanying press release notes that Brazil will be able to use special instruments to deal with tax planning structures.
The list, replacing a list of 53 jurisdictions published in 2002, contains two sections.
The first (below) contains 65 jurisdictions which do not tax income, or which tax at below 20%, or whose internal legislation does not allow access to information about the ownership or composition of legal persons (which includes corporations.) This includes the usual suspects such as the Channel Islands (“Ilhas do Canal”), Switzerland and Liechtenstein.
The second is a list of eight “privileged fiscal regimes” (regimes fiscais privilegiados) which do not necessarily have low tax rates but whose legislation contains fiscal privileges for certain types of legal persons.