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CORRUPTION: Little Movement Against Tax Havens

Julio Godoy

PARIS, Dec 17 2008 (IPS) - As many feared, little action has resulted from the latest attempt to move against tax havens.

The irony of the last event was perhaps telling of the inaction to follow. About 200 experts in international finance met last month in Monte Carlo to discuss tougher international regulations against tax evasion. Monte Carlo, in Monaco to the south of France, is one of the most conspicuous tax havens in Europe.

“At least, we were discussing tax evasion at the geographical heart of the matter,” a French financial expert told IPS. Monaco, he said, “has a very bad image even among the global financial community.”

Monaco, Andorra and Liechtenstein are the last three tax havens in Europe accused by the Organisation for Economic Cooperation and Development (OECD, a grouping of 30 wealthy nations), of not applying the body’s voluntary standards on financial transparency and exchange of information.

But the meeting in Monte Carlo, organised by the OECD’s Financial Action Task Force (FATF), was evidence at least that the fight against tax evasion is back on the international agenda.

The OECD and the FATF have been leading a fight against tax havens since the early 1990s. Tax havens are seen as the homes of speculative hedge funds, criminal money laundering, and tax evasion.


A tax haven is a territory – a state or a jurisdiction within a state – where taxes are low or not levied at all. This invites wealthy individuals and firms to set up a presence in these territories to escape taxation at home. And they are centres of money laundering because few questions are asked about the source of the money or where it goes.

The efforts of the OECD and the FATF have been largely fruitless.

The OECD hosted an international conference at its headquarters in Paris in October to seek consensus on new rules against tax havens. OECD director- general Angel Gurría said the meeting came “during the most difficult economic times we have faced in many decades.”

The conference was sought by the French and German governments. Under pressure as a result of the global financial meltdown, and the need to bail out banks facing bankruptcy due to their involvement in speculative transactions, France and Germany have been leading efforts to control, or even close, tax havens.

“We have agreed to lend money to the banks to rescue them from bankruptcy, but at the same time they cannot continue working with tax havens,” French president Nicolas Sarkozy said ahead of the OECD meeting. Tax havens must be closed, he said.

Gurría estimates that tax havens across the world hold up to 7 trillion dollars (a trillion is a thousand billion). He said at the meeting that “many countries…have over the last three years reinforced their (anti-tax evasion) provisions.”

But some figures on tax havens suggest otherwise. According to Tax Justice Network, a London-based independent organisation, some 11 trillion dollars are hidden away from taxation in European countries such as Monaco, Liechtenstein, and Switzerland, and other tax havens across the world.

Eight years ago, the International Monetary Fund (IMF) estimated the total amount in tax havens to be a trillion dollars. If these figures are all correct, they would suggest that money flows into tax havens have increased significantly.

The ‘black list’ of “non co-operative” tax havens the FATF puts together itself would suggest that there are no more tax havens. In 2000 the FATF blacklisted 15 countries, jurisdictions, and territories for not co-operating in the fight against tax evasion. The last FAFT ‘list’ released in October 2006 is blank.

According to Gurría, the OECD’s own black list has by 2008 been reduced to Andorra, Liechtenstein and Monaco.

But many experts believe this kind of listing is meaningless when there are thousands of secret bank accounts being operated throughout the tax havens. And they say renewed efforts for international regulation of tax havens seem to be starting from scratch again. “Of course, I salute this return, but I am still pessimistic,” Jean Merckaert who coordinates a French analysis group on tax havens told IPS.

Merckaert said the fight is at least 15 years old. “More than 10 years after many international forums started to debate about tax havens and how to control them, we have to admit that nothing has changed.”

The supposed international cooperation on this was merely rhetoric, he said. “To get erased from the FAFT black list, it sufficed that the tax havens signed an agreement of cooperation,” said Merckaert.

And so European Union (EU) member countries, such as Germany, have launched a crackdown on tax evasion against their citizens for maintaining secret bank accounts in other EU states.

At the FATF meeting in Monte Carlo, Prince Alberto of Monaco denied that his country is a tax haven. “I know that Monaco has to have an irreproachable conduct in its financial dealings,” he told the audience.

There are not many takers for that view. “Monaco remains a black hole of financial globalisation,” Paris judge Renaud Van Ruymbeke, who has led many inquiries into financial crimes, said in an interview published in the daily Le Monde.

Van Ruymbeke said it was odd to see renewed talk of closing down tax havens. “I am surprised that our political leaders only now discover offshore financial centres,” he said.

“Many colleagues and I denounced it in 1996 when we launched the Geneva appeal, drawing attention that tax havens are also havens for criminals,” Van Ruymbeke added.

In a recent appeal, the French Catholic organisation Le Pelerin said that a modest tax on just as modest estimated interest on capital hidden in tax havens would pay for a global campaign to provide universal access to therapy against AIDS, to guarantee universal primary education, and to eradicate hunger.

 
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