Has the Tide Turned on Financial Secrecy?

Has the Tide Turned on Financial Secrecy?

This is the sixth in our series of articles looking at some of the topics to be discussed at our November 2018 conference, Beyond Borders: International Taxation into 2020. More specifically, Alex Cobham, CEO of the Tax Justice Network, will take a look at the progress of the battle against financial secrecy during the past twenty years and what’s left to do to further curtail illicit financial flows. Book your early bird ticket HERE before it’s too late!
Launched in 2003, the Tax Justice Network is an international network that pushes for systemic change in the international tax arena and looks to ‘change the weather’ on issues pertaining to tax havens and the globalization of the financial world.
Alex Cobham, the CEO at Tax Justice Network and a Visiting Fellow at King’s College London, will be one of the keynote speakers at Beyond Borders: International Taxation into 2020, our first annual conference taking place in Limassol, Cyprus, in November 2018.
More specifically, Alex will be giving a presentation titled “Turning the Tide? Twenty Years in the Evolution of Secrecy in Cross-Border Financial Services,” which looks at how financial secrecy has whittled down during the past two decades and what’s still needed to further curtail tax evasion and other illicit financial activities.

Financial Secrecy: What Has Been Accomplished

Overall, the Tax Justice Network believes there has been plenty of success in bringing forth greater transparency to the financial world.
According to Alex, as explained to Taxlinked in an email interview, “Over the last twenty years, we’ve seen quite dramatic progress. The three elements of the ‘ABC of tax transparency’ have gone from being unknown or derided as utopian, to forming the basis of the global policy agenda—albeit none of the three has yet been fully delivered.”
Succinctly put, the ABCs of transparency—A) Automatic and multilateral exchange of tax information; B) Beneficial ownership registers (public), and; C) Country-by-country reporting by MNCs—are no longer hidden from view and have taken centre stage in the battle to curtail tax evasion and other illicit financial activities, as exemplified by the work being carried out by the European Union, the United Kingdom and the OECD, among others.
As reported in Tax Justice Network’s annual report for 2017, last year “49 jurisdictions automatically exchanged information and 53 more committed to doing so in 2018. Argentina alone received information on over 35,000 banks accounts. Not only is the practice feasible, the appetite for it is great.”
Furthermore, in terms of the disclosure of a company’s ultimate beneficial owner, the European Council and Parliament passed legislation “requiring each EU member state to create a public record of companies’ beneficial owners” and urged jurisdictions “to recognise any person who owns or controls a single share in a company as a beneficial owner of that company, not just individuals who own more than 25 per cent of shares in the company.”
Furthermore, Cobham says, “Arguably, the biggest change since the Tax Justice Network was formally established in 2003 is not about a specific policy outcome, but the change in the political weather: the extent to which international financial secrecy is seen as a global threat, rather than a trivial matter or even a respectable source of competitive advantage.”
“It took us until 2007 to get the first major media front page tax justice story, but now a LuxLeaks or a Paradise Papers is never far away. And the public’s anger drives policy change, even when politicians are themselves conflicted.”
Overall, argues Cobham in a paper presented in April 2018 at Spanish think tank Real Instituto Elcano, “The last two decades have seen the emergence of a powerful tax justice movement globally, led by civil society expertise and increasingly by policymakers of the global South…While technical and political challenges remain, progress on civil society’s policy platform for tax transparency means that the data is available to construct robust indicators with the potential to drive change by ensuring accountability at the national level—including the many jurisdictions that benefit from facilitating tax abuses and corruption elsewhere.”

Long Way to Go in Fight Against Financial Secrecy

Despite the multiple success stories in recent years, the Tax Justice Network believes there’s still plenty of work left to do.
Mark Bou Mansour, writing on Tax Justice Network’s 2017 annual report, says, “We still have much further to go, of course, and the progress made must be defended every day against those who would push back.”
Still, writes Mansour, “2017 marked a global shift in attitude on tax justice. In the early 2000’s being involved in offshore financial activity was a normal part of good business, and minimising tax was simply regarded as smart behaviour. In 2017, Prime Ministers and Chief Executives resigned because of it.”
“There is a very long way to go, not least to make sure that lower-income countries enjoy the full benefits of transparency – but the world of financial secrecy has changed unimaginably over two decades, and there are reasons to be optimistic for the future too,” Cobham concludes.
Any thoughts on the road ahead for financial secrecy and transparency? Drop us a line in the comments section!
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