- Development & Aid
- Economy & Trade
- Human Rights
- Global Governance
- Civil Society
Saturday, May 28, 2022
WASHINGTON, Jun 19 2013 (IPS) - The United States is being singled out for criticism after the Group of Eight (G8) rich countries failed to adopt a plan pushed by British Prime Minister David Cameron to require the creation of public country-level registries with detailed information on corporate ownership and activity.
Although the United States did unveil important new pledges Tuesday to crack down on anonymous “shell” corporations, used by money launderers and tax evaders, critics point out that Washington has not outlined how it will implement these commitments. They also warn that the commitments will not put corporate ownership information into the public domain, a criticism also levelled at the G8 declaration overall.
The G8 met Monday and Tuesday at a summit in Northern Ireland, during which tax evasion and corporate transparency were given top billing. While Cameron had hoped other countries would back his call for the creation of public registries, none did so.
Even as the G8 countries decided on a more incremental approach to financial transparency than some had hoped, however, they did arrive at a host of important agreements, including for countries to begin sharing tax information.
“The G8’s declaration is absolutely historic,” Eric LeCompte, executive director of Jubilee USA Network, a religious antipoverty group, said Tuesday. “We would like to see even greater moves for corporate transparency, but the foundation the G8 built will take us into a more accountable corporate world then we’ve seen before.”
Christine Lagarde, managing director of the International Monetary Fund, the Washington-based multilateral lender, similarly issued congratulations, noting, “International tax avoidance and evasion have emerged as major risks to government revenue and as threats to the credibility of tax systems in the eyes of citizens – in both advanced and developing countries.”
Others are offering more tempered reactions, however, particularly over the failure of the G8 to explicitly call for the creation of public registries detailing the “beneficial” (or final) ownership of all companies, including shell corporations.
While the United States has now said it will be creating these registries on its own, these will apparently be available only to law enforcement and tax authorities. Critics urge these databases to be made open to the public from the beginning.
“It is important that the United States has committed to creating registries of beneficial information, because this does go beyond the G8 declaration,” Stefanie Ostfeld, a senior policy advisor with Global Witness, an advocacy group and member of the Financial Transparency Coalition, told IPS.
“But it’s not putting that information in the public domain, as the United Kingdom is saying it will do. Without such a commitment, these moves will not live up to their potential impact.”
“We’re very pleased to see the G8 as a whole recognise that anonymous shell companies around the world are a massive problem,” Heather Lowe, legal counsel and director of government affairs at Global Financial Integrity (GFI), a Washington watchdog group, told IPS.
“But then it comes down to the individual national action plans to achieve meaningful progress. In this, the United States is particularly significant in part because of the very high number of companies created here in the first place.”
In recent years, the United States has increasingly spoken out on international tax evasion and money laundering, with a domestic political debate progressing on related reforms to the tax code. At the same time, the United States is widely thought to shelter a huge number of these shell corporations, used to launder corrupt earnings or hide income of foreign citizens.
“It’s very hard to tell how many of these shell companies are incorporated here, as the U.S. doesn’t require information on the ultimate beneficial controller of each company,” Lowe said.
“However, we do know that the potential for a large number of anonymous corporations existing under U.S. law is very high. We also know that those who want to create such a company know this is a good place to do it.”
U.S. shell companies are estimated to have facilitated some 18 billion dollars in illicit transactions in 2005 alone, according to the Treasury Department. Advocates say this legal laxity is directly affecting developing economies, allowing corrupt officials or cronies in resource-rich countries to siphon billions of dollars out of their countries.
According to a recent report by GFI, such abuse could be resulting in losses for developing countries as high as a trillion dollars a year – 10 times the amount those countries receive annually in foreign aid.
For this reason, activists had increased pressure substantially in recent months on President Obama, calling on him to back Cameron’s plan to create a public registry on corporate ownership.
Yet the final pledge fell short of this goal. In a fact sheet released Tuesday, the White House said simply that “The Treasury Department, along with other federal agencies, will continue to advocate for comprehensive legislation on beneficial ownership.”
Simply pushing for such legislation is in line with a commitment the Obama administration made nearly two years ago. According to Lowe, little progress has been made since then.
“While this is a step forward, it’s certainly not a change in U.S. government policy,” she said.
“This [G8 announcement] is really just a recommitment to the issue. That’s fine, but what we really wanted to see was a plan for how the government would advocate for new legislation, which we haven’t been able to obtain.”
In the past, U.S. legislation to require the collection of “beneficial ownership” information has been difficult to advance. One proposal has been introduced (and rejected) in the Senate at least three times over the past decade, at one point being co-sponsored by then-Senator Obama.
On Tuesday, Senator Carl Levin, a primary sponsor of a bill that would require such disclosure, lauded the new G8 commitments: “I said before the summit that the G8 nations were poised to strike a hammer blow against offshore corporate tax avoidance. The G8 commitments made today, if carried out, can bring that hammer down.”
Levin’s legislation, as well as a similar bill in the House of Representatives, is expected to be reintroduced in the coming weeks. Meanwhile, it is currently unclear whether regulatory or executive action on this issue could allow the administration to work around Congress, but advocates suggest they see some opportunities for doing so.
IPS is an international communication institution with a global news agency at its core,
raising the voices of the South
and civil society on issues of development, globalisation, human rights and the environment
Copyright © 2022 IPS-Inter Press Service. All rights reserved. - Terms & Conditions
You have the Power to Make a Difference
Would you consider a $20.00 contribution today that will help to keep the IPS news wire active? Your contribution will make a huge difference.