"We must stop thinking of tax evasion as some sort of
harmless sport," John Christensen, of the Tax Justice Network
(TJN), told an International Tax Review conference on
tax and transparency last week, adding that developed countries
had to do more to help developing countries combat the
"There is an inexorable movement towards automatic exchange
of information (EoI) as the global standard, " he said.
In his view, automatic EoI has now been accepted as the
standard to work towards. He said leaders such as Indian prime
minister Manmohan Singh had called for it at the G20 summit in
Cannes last November.
"Automatic exchange of information makes it possible to tax
capital and not just income and capital gains," he said.
Christensen was speaking at a rare, if not unique, event,
which also featured a keynote speech by Pascal Saint-Amans,
recently-appointed director of the OECD’s Centre
for Tax Policy and Administration.
The International Tax Review conference brought
together tax executives from multinational companies,
officials, campaigners, tax practitioners and the media to
discuss attitudes to tax transparency and how it might be
achieved. Panels covered topics such as country-by-country
reporting, transparency challenges for international companies
and how and if more transparency could be brought to the issues
of transfer pricing and dispute resolution.
Christensen described tax evasion as "corrosive" and said
that some of its harmful effects are it "clearly facilitates
economic free-riding and damages trust and institutional
quality". He was critical of the leadership provided by
OECD’s Global Forum on Transparency and Exchange
of Information against tax evasion, particularly through the
promotion of bilateral tax information exchange agreements.
"The on-request model of tax information exchange agreements
is not sufficiently strong to tackle tax evasion," he said.
Priorities for G20
The TJN’s recommendations to the G20
about ensuring automatic information exchange becomes the
international standard including helping developing and
transition countries with building capacity to handle
information exchange and the role of banks and law firms "as
facilitators of tax evasion" had to be clarified.
Christensen said the TJN supports America’s
Foreign Account Tax Compliance Act (FATCA) as a step towards
automatic EoI but the legislation is not its preferred approach
as it is unilateral rather than multilateral. The law, which
comes into force on a phased basis from January 1 next year,
requires foreign financial institutions to provide the Internal
Revenue Service with information about their US accountholders
or pay a withholding tax of 30%.
Referring to other attempts to recover tax and
penalties arising from evasion, he said there were too many
loopholes in the agreement dealing with the undeclared income
of UK taxpayers in Switzerland. In March this year the
governments of both countries had to add a protocol to the
original agreement signed on October 6 2011, after objections
from the EU.
The agreement means if UK taxpayers do not disclose details
of their Swiss accounts holding undeclared income they will
have to pay a one-off charge of between 21% and 41% if the
account is open between December 31 2010 and May 31 2013.
And from 2013 income and gains from investments in Swiss
accounts will be subject to different rates of withholding tax,
unless they are disclosed.
Christensen said TJN supporters had challenged each other to
come up as many loopholes as possible and they had quickly come
up with 15.
"The withholding approach delegates tax collection to the
foreign entity," Christensen said.
"Now is the time to move forward much faster and recognise
automatic information exchange as the international standard,
and to strengthen existing arrangements to cover a wider range
of incomes and entities," Christensen added.