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G20 Calls on All Jurisdictions to Implement Automatic Exchange of Tax Information

Leading Finance Ministers Offer Support to Developing Countries in Employing “New, Global Standard,” Eliciting Praise from Civil Society


GFI Disappointed in G20 Failure to Embrace Country-by-Country Reporting or Incorporation Transparency


July 22, 2013
Clark Gascoigne, +1 202 293 0740 x222


WASHINGTON, DC – Over the weekend, the G20 finance ministers echoed the call by the G8 countries at Lough Erne to rapidly move to a system of automatic exchange of tax information, a move praised by Global Financial Integrity (GFI) as essential to cracking down on international tax evasion.  As with the G8, the G20 finance ministers offered to provide support to poorer countries as they move to adopt the “new, global standard,” likewise eliciting support from GFI.  However, the Washington-DC based research and advocacy organization expressed disappointment in the G20’s failure to embrace tax transparency for multinational corporations and the finance ministers’ reticence to meaningfully address the issue of phantom firms.


“We enthusiastically welcome the G20 statement calling on all countries to adopt automatic tax information exchange,” said Raymond Baker, President of GFI, “and we are most excited to note the G20’s commitment to expanding automatic tax information exchange to low-income countries.  Offering to provide developing countries with the financial and technological support they need to implement the new global standard is vital to realizing effective automatic exchange within the near future, and it emphasizes the G20’s commitment to the new standard.”


According to GFI’s research, tax haven secrecy, anonymous shell companies, and trade-based money laundering facilitated the illegal outflow of roughly $261 billion from the Greek economy in the lead-up to the European debt crisis, and tax haven abuse is estimated to cost U.S. taxpayers roughly $150 billion per year.


“While tax evasion and corruption are serious plagues for developed countries, illicit financial flows—the proceeds of crime, corruption, and tax evasion—drain roughly $1 trillion per year from developing countries,” added Baker.  “Automatic exchange of tax information between jurisdictions is one of the best ways to begin curtailing this problem.  It ensures that tax authorities and law enforcement in both rich and poor countries have the necessary records they require to detect and deter tax evasion.  Providing assistance to developing nations as they work to implement automatic exchange is one of the best ways richer nations can contribute to economic development in the Global South.”


Falling Short on Tackling Corporate Tax Avoidance


Despite the organization’s praise for the G20’s comments on tax information exchange, GFI noted that the finance ministers fell short on tackling tax avoidance by multinational corporations.  For years, GFI has recommended requiring multinational companies to publicly disclose revenues, profits, losses, taxes paid, and staff levels on a country-by-country basis as a necessary transparency measure to expose and dissuade abusive tax avoidance.


“While we welcome the attention that the G20 and OECD have given to corporate tax avoidance, we’re very disappointed that the G20 failed to recommend public country-by-country reporting for multinational companies,” said GFI Managing Director Tom Cardamone.


“As recent hearings and articles exposing the profit shifting practices of companies like Apple, Starbucks, Amazon, and Google highlight, international businesses are finding creative ways to artificially shift their profits out of the nations in which they were generated and into tax havens,” continued Mr. Cardamone. “Such behavior starves governments of much needed tax revenue at a time when rich and poor nations alike are struggling to make ends meet.  Requiring companies to disclose where they’re operating, where they’re making their profits, and where they’re paying taxes is a straightforward way to detect and deter corporate tax dodging.”


Failure to Address Anonymous Shell Companies


As the G20 has done many times before, it reiterated on Saturday that anonymous shell companies can cause problems, but it did not propose any meaningful action to tackle the issue.  Instead, the G20 communiqué simply endorsed the Financial Action Task Force (FATF) standards for the disclosure of beneficial ownership information, which GFI has warned are grossly insufficient to eliminate anonymous shell companies and their abuse.


“The G20 finance minister’s comments demonstrate that they have not yet fully understood the nefarious role of anonymous shell companies in the movement of corrupt, tax evading, and otherwise illicit money around the world,” said Heather Lowe, GFI’s Legal Counsel and Director of Government Affairs.  “We are very disappointed in the failure to see anonymous shell companies as an integral part of the illicit finance framework that requires meaningful reform.”


“Anonymous shell companies are the most-widely used method for laundering the proceeds of crime, corruption, and tax evasion,” noted Ms. Lowe. “They facilitate sex slavery, arms trafficking, and drug dealing.  Further, these phantom firms are also used to disguise campaign contributions, get around being barred from an industry, and dupe other business owners. Public registries of meaningful corporate ownership information are not only about stopping crime, they are about sound business practice and open and fair elections, among other things.   The G20 ministers have failed to grasp this basic and important concept.”


T o schedule an interview with Mr. Baker, Mr. Cardamone, Ms. Lowe, or other GFI spokespersons, contact Clark Gascoigne at +1 202 293 0740 x222 (Office) / +1 202-815-4029 (Mobile) / cgascoigne@gfintegrity.org. On-camera spokespersons are available in Washington, DC.


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Notes to Editors:


  • Click here to read an HTML version of this release on our website.
  • Click here [PDF | 311.8 KB] to download the full communiqué of the G20 finance ministers’ meeting, published July 20, 2013.
  • Click here [PDF | 1.9 MB] to download the OECD’s report to the G20 including the OECD’s Action Plan on Base Erosion and Profit Shifting, published July 19, 2013.
  • Click here to read GFI’s analysis of the OECD report and GFI’s statement ahead of the G20 meeting, published July 19, 2013.
  • Click here to read GFI’s analysis of last month’s G8 Summit outcome, published June 18, 2013.


Contact:


Clark Gascoigne
cgascoigne@gfintegrity.org
+1 202-293-0740 ext.222


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Global Financial Integrity (GFI) is a Washington, DC-based research and advocacy organization which promotes transparency in the international financial system as a means to global development.


For additional information please visit www.gfintegrity.org.


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