WHILE G20 leaders declared that automatic exchange of tax information would be
the new global standard, to counter tax haven secrecy, there was silence on the
issue of anonymous shell companies. The G20 Finance Ministers and Central Bank
Governors released their communiqué after two days of meetings in Washington
before the annual meetings of the World Bank and International Monetary
Fund.
“The Financial Action Task Force (FATF) standards for the
disclosure of beneficial ownership information, are insufficient to eliminate
anonymous shell companies and their abuse. Incorporation of anonymous shell
companies, trusts, and foundations, facilitates terrorism, sex slavery, and tax
evasion, that pose a systemic risk to the financial system. Tax haven secrecy
and anonymous shell companies facilitate crime, corruption, and tax evasion,
costing the developing world roughly US $1 trillion in illicit outflows every
year,” stated Raymond Baker, Director, Global Financial Integrity, a
Washington-based non-profit research and advocacy organization.
According
to GFI, while this secrecy costs the US Treasury $ 150 billion annually in lost
tax revenue, it siphoned US $261 billion out of the Greek economy in the run-up
to the Euro crisis and drained US $ 212 billion from Russia, the current chair
of the G20, following the collapse of the Soviet Union.
“Automatically
exchanging tax information between countries and getting rid of anonymous shell
companies would significantly curtail these illicit flows, bolstering government
revenues in poor and rich nations alike,” said Baker.
An automatic tax
information exchange would help ensure that tax authorities and law enforcement
authorities have the necessary records required to detect and deter billions of
dollars in tax evasion.
Recently, various Europeon nations had announced
that they would begin a pilot program to exchange information automatically on a
multilateral basis. An automatic exchange on a multilateral basis is believed be
a significantly more effective system than bilateral exchange and needs to
become the global standard.
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