Ethics and governance in the European Financial centers

This is the e-mail I sent today:

Dear Mr Gurria

Before the Association Luxembourgeoise des Professionnels du Patrimoine, Luc Frieden confirmed the objective to sign 20 OECD-compliant tax agreements by the end of the year.

One of these was signed with the USA this week, which was welcome by your organization that stated in a press release it is a major step forward in international efforts to counter tax evasion.

I am afraid your organisation is quite naïve to believe that data will be provided as most tax evasion funds will not be countered.

Before the Association Luxembourgeoise des Professionnels du Patrimoine Luc Frieden confirmed as well that Luxembourg will oppose the automatic exchange of tax data. The head of the Association welcomed this commitment by saying: "We rely on you. Our clients believe in us. They are there because of bank secrecy."

This is definitely an admission that bank secrecy is used for tax evasion purposes, all the more than tax evasion is neither prohibited by the "rules of conduct" nor sanctioned by e criminal law of tax havens, contrary to money laundering.

To assess to what extent the OECD Model agreement on exchange of information on tax matters is not relevant to counter tax evasion, let's use a metaphor.

Let's imagine that (Luxembourg) Financial Institutions are like a travel agency, clients being the foreign tax administrations. Should a client a want information about a destination (Are there flights to go from X to Y, what are the schedules... ?) to get a ticket, he /she would not get an answer as only accurately detailed requests would be satisfied: I want a ticket for the flight from X to Y at HH:MM, number Z.... The request is accurate and detailed enough and would be satisfied. This is exactly how the OECD tax model works for the exchange of information. Only a few tickets could be sold with the OECD tax model logic.

Additionally I do think that every topic is linked: tax evasion, corruption, money laundering... That is the reason why a new approach is needed and implemented by some NGOs as the OECD that depends on the jurisdictions is prisoner in a way of political games.


Yours sincerely

Jérôme Turquey
Consultant is business ethics and reputational risk
http://ethiquedesplaces.blogspirit.com

Richard Murphy has reported that Las Vegas Review wrote that President Barack Obama’s plan to limit tax breaks for multinational companies will include an amendment that affects alleged tax havens at home, including Nevada and Delaware, a knowledgeable source in Washington, D.C., said. The yet-to-be-announced amendment will make sure that U.S. states do not replace offshore countries like Switzerland, Luxembourg and the Cayman Islands as tax havens for wealthy individuals and businesses, the source explained.

As the existence of Delaware and Nevada was the only argument that Luxembourg politicians and officials found to avoid the handing-over in question, it is a new example of the bad approach of this jurisdiction that need homines novi (new leaders).

In a recent letter to Hans-Rudolf Merz, Angel Gurria clarifies the role of the OECD and how Switzerland was actually informed of what was going on.

I have personally no doubt that Switzerland, which is a jurisdiction that has a long banking tradition, will be able to be a faithful player.