Ethics and governance in the European Financial centers

Bob Reynolds has reported in Accountancy Age that offshore financial centres will face renewed pressure in their bid to achieve and retain “white list” status for tax compliance, after a meeting of global heads.

Financial regulators gathered to debate the future standards for admission to the tax transparency compliance list, the scope of peer reviews for these countries, and the nature of fiscal sanctions to be applied to the non-compliant.

Senator Carl Levin was speaker at the Conference on Increasing Transparency in Global Finance.

What he stated is worth quoting:

"It is highly encouraging that you are meeting to discuss how illicit money arising from tax scams, corporate misconduct, foreign corruption, and other wrongdoing has hurt economic development, emerging civil societies, and the rule of law."

"Hiding assets offshore is blatantly unfair to the vast majority of taxpayers who comply with their civic obligations and have to shoulder the additional tax burden when others don’t pay what they owe. It deprives government treasuries of money needed to protect our citizens and provide the services that make our nations more secure and prosperous.

"As G-20 leaders signaled a new willingness to take action against uncooperati"ve tax havens, the changes made by Liechtenstein and Switzerland set off a chain reaction in other bank-secrecy nations. Places like Luxembourg, Austria, Andorra, Monaco, and others also pledged for the first time to share tax information and cooperate with international tax enforcement."

"The battle to end offshore tax abuse is far from over."

"While 87 nations have now pledged to adopt the OECD’s model tax information exchange agreement, it is critical that the international community ensure that these pledges are followed by concrete actions – that tax havens not only sign tax sharing agreements but implement them. If words are not followed by deeds, the international community must have a way to respond."

"The G-20 or a smaller subset like the G-7 nations could act as a group to bar their financial institutions from doing business with uncooperative tax haven banks or jurisdictions. Tax haven banks facing that type of united action would have a much harder time turning law enforcement away empty handed. And putting the necessary legal mechanism in place now to stop tax haven abuses in the future would give the international community a powerful new tool to use when the next offshore tax scandal hits."

"We have the means to end offshore tax abuse if we have the political will to act. Offshore tax evasion currently deprives countries of billions of dollars in needed revenues, benefiting the wealthy few who have the resources to hide assets offshore while offloading their tax burden onto the backs of honest taxpayers. When that happens, tax haven abuse undercuts the tenets of fairness and shared sacrifice on which free societies rely."

"Tax evaders reap enormous benefits from civil society -- they enjoy the security our military and law enforcement agencies provide; they invest and prosper thanks to the rule of law and sanctity of contract which our regulators and court system enforce; and they build their economic future on the financial, communications, and transportation infrastructure that taxpayers finance. What we ask in return is that all members of society pay that share of their income that they owe, so that governments can continue to protect fundamental rights and provide basic services. If that social contract breaks down and some refuse to pay their share, the effects on civil society are caustic. Ending offshore tax abuse is about more than money; it is about protecting the principles upon which our economic and political systems are built. "

The United States should encourage its G20 partners to sanction offshore banks and jurisdictions that fail to cooperate with international tax enforcements efforts, Sen. Carl Levin (D-Mich.) said yesterday in a letter to President Obama urging U.S. leadership on tax haven issues at the G-20 summit in Pittsburgh next week.

In his letter, Levin, chairman of the U.S. Senate Permanent Subcommittee on Investigations, calls for the G20 nations to bar tax haven banks from participating in the global financial system if they refuse to cooperate with law enforcement investigations of tax evasion

In his letter, Levin encourages the President to push the G20 nations to adopt an approach on tax havens similar to successful methods currently in use in the United States to target international money laundering. With those methods, U.S. financial institutions can be barred from doing business with nations or financial institutions engaged in money laundering. A provision allowing the same measures to be applied to nations or financial institutions that impede U.S. tax enforcement is included in the Stop Tax Haven Abuse Act, which Levin introduced this year and which Congressman Lloyd Doggett has introduced in the House. President Obama has endorsed that bill and cosponsored similar legislation in the last Congress when a member of the Senate.

“If the legal mechanisms were in place, and a tax haven bank refused to cooperate with a tax investigation, the United States, acting on its own, could stop that tax haven from taking advantage of the U.S. financial system,” said Levin. “If other countries adopted the same legal mechanisms, our G-20 partners or a subset like the G-7 could act as a group to lock the offending bank out of the global financial system. Tax haven banks facing that type of united action would have a much harder time turning law enforcement away empty handed.”

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