Tuesday

16th Aug 2022

G8 tax deal falls short of expectations

  • Lough Erne, Northern Ireland: Cameron said the deal has the 'potential' to end bank secrecy (Photo: President of the European Council)

The G8 summit in Northern Ireland concluded with mixed results, as leaders pledged to clamp down on tax dodgers and to improve corporate transparency but did not agree to put in place binding rules.

A G8 communique on Tuesday (18 June) said nations in the club back the idea of automatic exchange of tax information between each other.

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But it did not say information-sharing should be open to developing countries.

Despite the exclusion, UK Prime Minister David Cameron, who chaired the talks, said the summit declaration had "the potential to rewrite the rules on tax and transparency for the benefit of countries right across the world, including the poorest countries in the world."

He added: "We have commissioned a new international mechanism that will identify where multinational companies are earning their profits and paying their taxes so we can track and expose those who aren't paying their fair share."

The G8 deal also failed to include public registries of company ownership.

Six of the G8 countries promised to present national plans aimed at increasing transparency in the area.

But for their part, Germany and Russia refused to draw up internal action plans, while signing up to a looser set of "core principles."

"Companies should know who really owns them, and tax collectors and law enforcers should be able to obtain this information easily," the G8 statement said.

"This could be achieved through central registries of company beneficial ownership and basic information at national or state level. Countries should consider measures to facilitate access to company beneficial ownership information by financial institutions and other regulated businesses. Some basic company information should be publicly accessible," it added.

EU countries will get the chance to turn rhetoric into reality in the coming months.

In February, the European Commission proposed a new anti-money-laundering (AML) law that would require companies to disclose beneficial owners if requested by law enforcement authorities.

This would have a wider scope than the US anti-tax-cheat law, Fatca, which targets a wide range of financial intermediaries, but not shell firms or trustees.

The EU bill also does not require official registries to be open to public scrutiny, however.

The EU is also working on an amended Savings Tax Directive designed to pierce the secrecy surrounding ownership of trusts and foundations.

For her part, Eloise Todd, the Brussels director at the British-based development charity One, called on the EU to "seize the initiative."

She described the EU's draft AML directive as "an opportunity to move within the next twelve months towards public registries of the real owners of companies in Europe."

In most of the world, owners of shell companies are not legally required to disclose their identities in a situation that helps them to shift money from jurisdiction to jurisdiction.

According to Global Financial Integrity, an NGO in Washington, "phantom firms" cost developing countries $859 billion (€750bn) in 2010 in lost income.

EU seeks quick deal on tax transparency

The EU is hoping to reach agreement on automatic exchange of data on overseas bank accounts, according to a letter sent to national capitals on Wednesday

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