March 13, 2012 - The Tax Justice Network has today published a report that is very critical of the OECD’s Global Forum peer review process, the main mechanism for assessing the effectiveness of Tax Information Exchange Agreements (TIEAs).
The report, entitled Creeping Futility of the Global Forum’s Peer Reviews, points out that the OECD is running a 'black, white and grey' list of jurisdictions, according to its 'internationally agreed tax standard. But the blacklist is empty. And the grey list consists of just three jurisdictions - Nauru, Niue and Guatemala. On this measure, everyone else is clean! Including some of the world's dirtiest secrecy jurisdictions, such as Panama, the British Virgin Islands and the UAE (Dubai.)
The Report has established that:
- The Global Forum's standards and peer reviews help tax administrations to improve the handling of cases of tax evasion that are already known, but the overall impact is marginal.
- By ruling out the much better and already widely practiced alternative of automatic information exchange, the massive problem of undetected tax evasion and illicit financial flows remains unaddressed by the Global Forum process.
- Relevant information held by accountants and lawyers representing individuals and companies suspected of tax evasion can be withheld or subjected to lengthy appeals through the TIEA process. This limits the relevance of peer reviews.
- The peer review process does not drill down to assess whether tax authorities can establish the beneficial owner of assets, because the OECD standard is satisfied if mere legal ownership of foreign companies is recorded. Frequently, the legal owner is a front hiding the true beneficial owner.
- The Global Forum allows its country members to demand money to pay for the costs of providing it with the requested information. This is particularly hard for developing countries; it is morally flawed, riddled with uncertainties and the Global Forum does nothing to address it.
John Christensen, the director of Tax Justice Network, said:
“The Global Forum has wasted a golden opportunity for tackling tax havens. They set the standards too low, then followed the time-worn approach of having a flawed peer review process. The Global Forum now needs to bring independent experts from civil society into the reviews to both strengthen the standards and rebuild the credibility of the entire process.”
Canadians for Tax Fairness is a member of the Tax Justice Network.