Ethics and governance in the European Financial centers

Luxembourg Prime Minister Jean-Claude Juncker said interesting things in an interview published Wednesday in le Temps.

Let's comment a couple of sentences freely translated.

The current bludgeoning disturbs me because it is based on an imposture while associating bank secrecy and tax haven, and because it does not hold any account of our public opinion.

Which public opinion? Who decides in the country?
Bankers actually decide. For example they created banking secrecy that was not in the Luxembourg tradition.

At the moment when G20 decide to increase regulation and to do a detailed examination of tax havens, its members have to be beyond any reproach. At the European Summit, it is my intent to ask for action. It is essential that British Territories, dependants of the British Crown (note by the editor: Jersey, Guernsey ...) in turn accept banking information exchange. I don't see either how the present review of the European Savings Directive can continue to ignore the British "Trusts", being at this moment out of the Detective's reach. The United Kingdom cannot continue to shelter large European fortunes from their national fiscal authorities. I want to take this a step further: it would be an aberration that the G20 would think about including Switzerland and Luxembourg in a blacklist, without including American States such as Delaware, whose LLC's (Limited Liability companies, note by editor) are exempt of any taxation! Morality in fiscal regulation matters is only credible if it is integral. Courage, and I bring this to France's and Germany's attention, has to be international."

I can agree with the paragraph, but I will say again that the British regulator is much more credible in its duty than the Luxembourg regulator.
Additionally, in the UK there is a public debate with people like Richard Murphy or Prem Sikka or John Christensen that do not have their equivalent in Luxembourg, where everyone agrees to hush up issues and protect Mammon.

This is a huge difference between both jurisdictions.

And by accusing other jurisdictions while not questioning on dysfunctions in his own jurisdiction, Prime Minister Juncker is not willing to correct what harms the reputation of Luxembourg.

The Tagesanzeiger has reported that OECD Secretary-General Angel Gurría provided a new list, on which financial centres with banking secrecy, such as Switzerland, Luxembourg and Austria, are optically separate from the tax havens.

According to the OECD, tax havens would be:
Andorra
Anguilla
Antigua and Barbuda
Aruba
Bahrain
Belize
Bermuda
BVI
Cayman Iceland
Cook Iceland
Dominica
Gibraltar
Grenada
Guernsey
Jersey
Liberia
Liechtenstein
Marshal Islands
Monaco
Montserrat
Nauru
Netherlands Antilles
Niue
Panama
Saint Lucia
Saint of cement and Nevis
Saint Vincent and Grenadinen
Samoa
San Marino
The Bahamas
Turks and Caicos Islands
Vanuatu

According to the OECD, Financial centers would be:
Austria
Belgium
Brunei
Chile
Costa Rica
Guatemala
Hong Kong, China
Luxembourg
Macao, China
Malaysia (lab SCN)
Singapore
Switzerland
The Philippines
Uruguay


The idea of splitting meets my idea of black list and grey list, but the way it was done raises a question of governance at the OECD:

As the Tagesanzeiger explained, the splitting was made under the pressure of representatives from Switzerland, Luxembourg and Austria that only said they will cooperate : but there a difference between announcements and actual implementation of the commitments.

This means that the three jurisdictions that represent less than 3% of the OECD budget would decide of the standards and policies of the OECD regarding harmful tax practices and other connected matters (corruption, or money laundering in the framework of the FATF that has the same contribution shares as the OECD).

There respective Contribution share in percentage is the following:
Switzerland: 1.5
Austria: 1.146
Luxembourg: 0.216

Total: 2.862 % of the OECD budget.


When looking carefully the lists, it appears that
- every OECD member is in the good list ; in other word no OECD member is a tax haven.
- there are many inconsistencies in the List: what about the Seychelles, Delaware... for the tax havens list? What about the City... for the financial centers list?

The Tagesanzeiger has published a fragment of the OECD of jurisdictions which have made insufficient progress in the implementation of international tax standards at 5 March 2009.

Many jurisdictions said last week they were to relax their banking secrecy.

But
- banking secrecy is only one criterion,
- and these jurisdictions cannot be trusted on press releases.

To be definitely removed from a list (grey or black with a strict monitoring and an update of lists regularly) they have to demonstrate that they actually complies with international tax standards.

The difference between enacting and enforcing/implementing.


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