Financial Transparency Coalition

Country-by-Country Reporting Noticeably Absent; Disclosure of Beneficial Ownership Endorsed

The finance ministers from 19 OECD nations released a “Summary of Conclusions” as the result of their meeting in Berlin today.  While afirming previous committments – encouraging the use of “defensive measures” to be used against Tax havens, and calling for the disclosure of beneficial ownership of all companies, foundations, and trusts – the statement stops far short of calling for country-by-country reporting of profits by multinational corporations.  Additionally, the countries remain committed to the OECD standard on information exchange – a standard which we have shown to be ineffective at dealing with the problem of tax-evasion.

The statement reads that the participating countries:

16. ARE also DETERMINED to promote the best practices to protect their tax base against those countries and territories that are not implementing the OECD standards in a timely and effective manner. Defensive measures should be applied to prevent undue delays in the implementation. Up to each country, these defensive measures can include:

• increased withholding taxes in respect of a wide variety of payments made to non-cooperative jurisdictions;
• denial of deductions in respect of expense payments to payees resident in a non-cooperative jurisdiction;
• termination of treaties with countries and territories which refuse effective exchange of information.

17. UNDERLINE that they will consider a co-ordination of their action as regards some of the measures aiming at protecting their tax base against those countries and territories that are not implementing the OECD standards timely and effectively, such as:

• increased disclosure requirements, on the part of national and foreign financial institutions and collective investment vehicles, to report transactions involving non-cooperative jurisdictions;
• denial of the participation exemption;
• asking international financial institutions to review their investment policy with respect to non-cooperative jurisdictions.

While it is notable that the ministers agree that “defensive measures” are on the table.  It is very murky as to what those measures would entail – the statement offers examples of possible measures, but does not dictate definite measures.  Additionally, the statement clearly states that any measures are up to the discretion of each individual country, which leaves significant wiggle room. Wiggle room or not, though, this statement is a step in the right direction.

Most disappointing, however, is the fact that country-by-country financial reporting is not even mentioned in the document – a notable outcome given the UK Treasury’s recent endorsement of country-by-country reporting, and Stephen Timm’s public commitment to push for the measure at the Berlin meeting.

One can hope that the UK will not back down from its recent commitment given the disappointing outcome of this meeting.

On the other hand, a more pleasant outcome of the summit is the group acknowledgement of the importance of diclosing the beneficial ownership of all companies, trusts and foundations for the public record.  The statment reads that the countries:

18. NOTE the importance of the availability of information regarding beneficial owners of bank accounts, investment vehicles and other financial assets for taxation purposes, and URGE the OECD, the FATF and the EU to explore ways to facilitate access to information in relation to trusts, foundations, shell corporations and other arrangements that may be used for tax evasion purposes.

The current system allows for the establishment of shell trusts, foundations, and corporations – a system that jeopardizes both stability of our financial markets (e.g. AIG, Enron), and enables terrorist financing.  Indeed, the United States Congress is currently considering legislation ( The Incorporation Transparency and Law Enforcement Assistance Act – S. 569) which addresses this very issue.

While it is unclear as to whether any tangible actions will be taken against shell corporations, it is encouraging to see the issue acknowledged on a global stage.

Read the full statement here…