A Look inside the Mind of the OECD - Financial Transparency Coalition

OECD

Last month, the Secretary General of the OECD, Angel Gurría, came to Washington, and among his appointments was a public talk at the Center for Global Development (where he is a member of the board of directors). A former finance minister and foreign minister for Mexico, Sr. Gurría was every bit the politician and statesman – smiling, good projection and eye contact, very personable and very optimistic – hardly a negative word was mentioned about himself or the OECD.

Secretary General Gurría began his talk with a brief summary of the world economy. He noted that the center of economic gravity is increasingly shifting towards developing countries, although OECD members still represent 60% market share of the global economy. Interestingly, there has also been a dramatic shift in aid flows and development paths. Developing countries are increasingly trading with each other, and the more developed among them are providing aid to their weaker colleagues – 15% of aid now comes from developing countries, which is 100 times more than just 20 years ago. The figures also show that millions of people have risen above poverty; however, Sr. Gurría noted that they have almost all been in China, so we are still far off from achieving the Millennium Development Goals. Inequality is actually increasing in high-growth countries. Youth unemployment, mostly among low-skilled males, is also a serious problem – 17 million unemployed at last count. Such is his world view and assessment of the global economy and its problems.

So what’s the world to do? Well, not surprisingly, the Secretary General proposes greater multilateralism. For this he recommends states engage in increased policy sharing to reach consensus at the G20 level (most of which are OECD member countries, too). I was very disappointed with what came next: Sr. Gurría argued that we should abandon “lofty goals” and instead focus our efforts on policies that are the “lowest common denominator.” I am sympathetic to his spirit of pragmatism and results, but he seems to misunderstand the value “lofty goals” add to the multilateral process. Focusing exclusively on the lowest common denominator is akin to a policy race to the bottom. Diplomats and leaders are only ever going to agree on the policy mix in which they have a common interest – that’s the nature of compromise and diplomacy (!) – but by promoting new ideas and innovative solutions at the outset of the process, we can eventually raise the bar. I am disappointed in the Secretary General’s lack of courage to reach higher and help coax the OECD member countries along.

Sr. Gurría did address banking secrecy and tax evasion, but here again I was disappointed by what he had to say. He claimed that we had “done away with bank secrecy” and tax evasion (?!). This success, he said, comes thanks to the OECD’s white, gray and black lists of cooperative jurisdictions and 600+ Tax Information Exchange Agreements (TIEAs). I am very concerned that the head of the OECD has these views. The various political crises in the Middle East and North Africa invalidate his first point about bank secrecy; just last month the Washington Post published an article revealing that U.S. Treasury officials had found $32 billion of Libya’s/Gadhafi’s money on its shores, mostly in just one bank. And TIEAs? Useless window dressing, at best. The OECD’s TIEAs only require signatory countries to share tax information on request, and the legal burden of proof these countries require in order to comply is extremely high, too much so to be of any real value to authorities trying to track the evading funds of their citizens.

The OECD and Secretary General Gurría may be satisfied with this status quo, but the Task Force on Financial integrity and Economic Development is not. We know full well that banking secrecy is still an entrenched part of the global financial system. That is why one of our five recommendations is to require banks to collect information on the beneficial owners of all the accounts they hold. We’ve also set the bar higher for combating corporate and individual tax evasion by recommending that countries exchange tax information about each other’s citizens automatically. My bank reports my accounts to the American Internal Revenue Service every year for tax season, why should they not also receive information on my offshore accounts (if I have any)? We will raise these and other issues at our 2011 annual conference in Paris October 6-7, and we hope that the OECD—with their headquarters located just down the road from the conference—will join us for these discussions.