Presentation of Deputy Secretary-General and Chief Economist Pier Carlo Padoan to G20 Finance Ministers
Seoul, 12 November 2010
I am happy to present the Report on progress made against international tax evasion which has been circulated to you by our Korean hosts.
The Global Forum on Transparency and Exchange of Information for Tax purposes recently met in Singapore and endorsed the Report which is provided in the first part of our submission.
Significant progress continues to be made including since the last ministerial meeting in Gyeonju.
1- More than 500 information exchange agreements have been signed. More than 40 peer reviews have been initiated of which 8 are completed. I would like to commend India who volunteered to be one of the first jurisdictions to be reviewed and was considered as meeting all the requirements to achieve effective exchange of information.
The reviews of Bermuda, Cayman, Jamaica, Monaco and Qatar identified a number of deficiencies that require action. Deficiencies identified in Botswana and Panama were considered sufficiently serious to stop them from moving onto the next phase of the review. We are working with these jurisdictions to address these problems.
Our aim is to have 70 reviews ready by the 2011 Summit.
2- Membership of the Global Forum continues to expand (95 jurisdictions at present).
The report also alludes to the fact that the work of the Global Forum takes place in the broader context of the OECD’s work to improve tax compliance. Which includes:
1- The Forum on Tax Administration, which brings together the tax commissioners of all G20 countries with those of another 23 OECD and non-OECD countries recently met in Turkey. On the basis of the experience in the UK and South Africa it has adopted a framework for a voluntary code of conduct for banks to improve compliance and identified ways to address the risks of non-compliance in the banking sector. Our work suggests that in many countries this could yield significant extra revenues.
2- We have updated the multilateral convention on administrative assistance in tax matters. This is a very powerful tool to counter offshore non-compliance open to all countries and we hope that all G20 countries will eventually sign it.
3- Last month we issued guidance on the design of voluntary compliance initiatives.
What are the concrete results?
By increasing tax transparency these initiatives are already helping countries to increase their revenues. A few examples:
- We estimate that Germany has already collected €4 billion from offshore evaders.
- The UK has collected an extra €600 million and expects this figure to increase to at least £7 billion.
- France has collected an extra €1 billion.
- Italy €5 billion and
- Greece estimates it could collect an extra £30 billion in revenues.
Argentina, Brazil, China, India, Russia, and South Africa are also using these initiatives and will see significant increases in revenues from tax evaders that have decided to “come clean”. Last but not least as indicated by President Zapatero this morning, fighting tax evasion could be extremely important to developing countries. For instance estimates indicate that flows from developing countries towards tax havens are a multiple of the inflow of aid.
Of course these figures represent one-off gains. Equally important are the long-term impacts on revenue. Once wealth held in tax havens/bank secrecy jurisdictions is declared, it remains in the tax net and yields an on-going revenue flow.
Finally, why is this important:
- It makes a significant contribution to fiscal consolidation.
- It improves the fairness of the tax system and fits into the broader agenda of improving integrity, propriety and transparency in the conduct of business.
- It reduces tax-induced distortions in financial markets.
We are prepared to continue to provide information on these developments.
If Ministers so wish we would be happy to prepare a more detailed report for your February meeting.
Let me conclude by saying that our work is not limited to improving tax compliance. We are also focusing on how to redesign tax systems to “enhance productivity” by removing distortions and improving incentives to work, save, invest and innovate. We would like to invite all G20 Finance Ministers to participate in a high-level roundtable on 13 April on how to achieve pro-growth tax reforms. We will be happy to coordinate this with the French Presidency.
Statement of Outcomes Singapore
Tax Information Exchange Agreements (TIEAs)