Unprecedented and historic, were just two of the many words used to describe the recent G20 summit in London. Other words, used mainly by those made cynical by years of summit watching, (where high minded rhetoric has a history of swift dissolution into weak communiqués diluted by political compromise or just plain belligerence, broken promises and pledges forgotten almost as soon as the ink was dry), used different words. Words like talking shop and complete and utter waste of time, effort and money.
In a post G20 snuggle with the Today programme, The UK Chancellor, Alistair Darling proclaimed that the G20 leaders had pledged to “support their economies and sort out the banking system”, grist to the mill for the cynics there then, after all, isn’t that exactly what our leaders are supposed to be doing?
In some respects though, this summit had the potential, if not to break the mould but then to crack it, albeit ever so slightly. On one topic, our world leaders were almost entirely united, that of, as Stephen Timms, the financial secretary to the Treasury, put it “the problem of tax havens”. Even on this though, a last minute spat between the French and the Chinese threatened to scupper what unanimity there was. Some deft footwork and no doubt a whole heap of horse trading later and it was all smiles again, at least for the cameras.
Within hours of the summit’s conclusion the Organisation for Economic Cooperation and Development (OECD) was issuing a list of those countries who had failed in varying degrees to comply with its guidelines. That list included China, but the financial centres of Macau and Hong Kong were omitted. For now.
Of course, all the tough talk on tax havens is one thing, it makes great headlines after all and one could be forgiven for thinking that headlines would be all that emerged, except for one small thing. Unbound by the shackles of the Bush administration’s illogical policies towards “tax competition” and years of meek acquiescence to Washington from Europe, a newly emboldened OECD seems more willing to tackle this thorny issue than ever before.
In a robust defence of the OECD’s stance on Switzerland for example, director-general Angel Gurría, stated “Switzerland does not yet have a single agreement on the exchange of tax information that conforms to the OECD standard.” In a separate move, and as tax authorities in Washington step up their pressure on offshore centres, the Swiss press was reporting that Credit Suisse (with an alleged 2,500 and 5,000 US clients with Sfr3bn (£1.78bn) in accounts undeclared to the Internal Revenue Service) has offered those clients “a choice of moving their money to a subsidiary, CS Private Advisers, which would declare financial details to the US authorities. Alternatively, they will be sent a cheque for the balance of their funds.” (http://www.guardian.co.uk/business/2009/apr/13/credit-suisse-us-tax-avoidance)
Gordon Brown himself has appeared similarly robust in opening a new front in the assault, not only against tax evasion but in a letter to the OECD he implored them to “address urgently the issue of tax avoidance” a practice that may indeed be costing the Treasury hundreds of millions of pounds a year.
As most crime writers will tell you, for motive, follow the money and whilst in a brave new world of transparency, developing countries may benefit from a reduction in the tax abuses which cost them dear ($160 billion in corporate taxes, according to Lord Wallace of Saltire), you can be sure that Treasuries around the world will seek to gain from a much larger claw back.
It is almost universally agreed (amongst the politirati at least) that having given Fred the Shred a good kicking, castigated the bankers, roasted the regulators (whilst neatly sidestepping any question of blame themselves), it was the shadow banking system that was in great part to blame for the construction and disemination of much of the poisonous debt bundles which brought the entire financial system to the edge of a very dark precipice, a precipice bridged only by the socialisation of vast amounts of private debt. Such public assistance has a price.
So, does all the current aggression towards tax havens finally sound their death knell? Well maybe not, sadly it isn't the beginning of the end for these "sunny places for shady people" and unlike Barack Obama, it is highly doubtful if Gordon Brown has the testicularity for such a fight, especially as so many of them are British dependencies, despite his bluster. Perhaps, just perhaps the new found post G20 consensus may signal the beginning of the beginning of the end at least for those practices buried deep within the intricate web of offshore complexities that the tax payer has an absolute right to be protected from.
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