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Automatic information exchange v. bilateral treaties for tax information by request

John Christensen from Tax Justice Network last Sunday analysed the reason why the OECD tax model based on bilateral treaties for tax information by request was adopted by secrecy jurisdictions in the European Union that do not want to go further in the implementation of the Savings Directive.


The statu quo is promoted by Luxembourg, the tiny jurisdiction where there are so many red flags of frauds and bad governance that are emphasized by the small size all the more than these red flags are visible in public and official sources, which are the visible part of the iceberg. The ABBL (the Luxembourg bankers' Association) wrote: in light of Luxembourg’s decision to adopt OECD standards in tax matters, the government has demanded that the exchange of information upon request, as defined by the OECD Model Tax Convention, becomes the only standard applicable within the European Union.



As John Christensen explains, The OECD’s standards for tackling tax evasion rely on complex, timeconsuming and ineffective bilateral treaties for tax information by request. G20 leaders must seize the current political opportunity to push for a more ambitious multilateral treaty process based on automatic information exchange on the model currently being used within the European Union.

Some will complain that automatic information exchange is too complex and detailed to provide the basis for a global standard for information exchange. We disagree. The OECD standard based on a ‘by request’approach, which they would like to have considered as the global standard, is weak and ineffective. One statistic alone demonstrates how weak they are: in the past three years the British Crown Dependencies of Guernsey, Isle of Man and Jersey have cooperated with only 17 exchanges of information across their entire network of treaty partners. That’s fewer than two exchanges a year for each jurisdiction. No wonder the tax evasion industry prefers the OECD exchange model to the European standard.

If anyone doubts the effectiveness of the European model they should note that a prominent British lawyer an adviser to tax havens, no less has urged these jurisdictions to cooperate with the OECD processes in order to resist pressure for the alternative automatic exchange process.

The tax avoidance industry knows that automatic exchange works. It is what the tax avoidance industry is afraid of, and with good reason.



18:03 Posted in General | Permalink | Comments (2)


Do you think similar banking secrecy practices are being employed in the United States?

Posted by: grow taller 4 idiots | 08/31/2009

Banking secrecy practices exist in many jurisdictions including France.
As far as the United States are concerned, the Bank Secrecy Act of 1970 (or BSA, or otherwise known as the Currency and Foreign Transactions Reporting Act) requires U.S.A. financial institutions to assist U.S. government agencies to detect and prevent money laundering. Specifically, the act requires financial institutions to keep records of cash purchases of negotiable instruments, file reports of cash transactions exceeding $10,000 (daily aggregate amount), and to report suspicious activity that might signify money laundering, tax evasion, or other criminal activities (see http://www.fincen.gov/statutes_regs/bsa/)

Tax evasion is included.

Later the 2001 USA Patriot Act has created many new rules for US banks in an attempt to defeat bank secrecy. A list of such banks or shell banks are given to the US banks who are not allowed to wire money to them. All new customers to US banks must now be asked if they are US citizens. If not, they must state their occupation and whether they expect to be wired foreign moneys.

Posted by: Jérôme Turquey | 09/01/2009

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