G20 Introduces “Transparency” Behind Closed Doors
September 21st, 2014
September 21st, 2014
WASHINGTON, D.C.—The G20’s recent focus on financial transparency is a welcome development, but instituting bare minimum requirements, or plans that allow for exclusion, simply give illicit flows an opportunity to continue their hazardous drain on the world’s most vulnerable economies.
Last Tuesday, the OECD released recommendations on Base Erosion and Profit Shifting (BEPS), which are aimed at cutting down on the ability of corporations to shift profits into tax havens. It’s well intentioned, but the execution leaves much to be desired.
“Apparently, transparency now takes place behind closed doors,” said Porter McConnell, Manager of the Financial Transparency Coalition (FTC). “From a small group of nations setting the standard for the rest of the world, to the OECD’s extreme measures to preserve total confidentiality in country-by-country reporting requirements, G20 Finance Ministers are ultimately getting flawed guidance.”
While the OECD’s recommendations would require multinational corporations to report financial information on a country-by-country basis, the vast majority of the information would remain confidential and out of the public’s eye.
“The fact that the secrecy doesn’t only cover information that is ‘commercially confidential’, but also everything that is ‘commercially sensitive’ sets a very bad precedent,” said Tove Ryding, Policy and Advocacy Manager for Tax with the European Network on Debt and Development. “If everything “sensitive” has to be kept from the public, it can become hard to get any information which can be used to even question corporate levels of tax payment.”
“With austerity cuts and governments around the world strapped for cash, it’s simply not possible for overworked tax authorities to keep up with well-organized tax dodgers on their own,” added Renaud Fossard, Tax Justice Policy Advisor with the Latin American Network on Debt, Development and Rights. “Scrutiny from civil society, journalists, and concerned citizens is paramount to halting the drain on public coffers from tax evasion and money laundering.”
“Illicit financial flows are a global problem, which demand a global solution, but the guidelines were drafted by a club of wealthy countries, including some that are at the root of the problem,” said Savior Mwambwa, Policy and Advocacy Manager for the Tax Justice Network – Africa and Regional Advocate with the FTC. “Meanwhile, over 100 developing countries, which lose billions of dollars in illicit financial flows every year, are asked to sit on the sidelines and watch the events unfold.”
Much like the BEPS process, the new OECD-led standard for a system of cross-border information exchange, released in July, used the tagline of “global”, but left developing countries looking in from the outside.
The way it’s written now, developing countries may get locked out for years, simply because they don’t yet have the technology to share their own tax data in a reciprocal manner – a requirement for entry into the new system.
“Rather than offering unrealistic starting points, we need a strategy that enables developing countries to integrate into the new system gradually; the current approach of insisting that developing countries bear all the costs before they can realize the benefits will only increase exclusion,” said McConnell. “It’s not good for developing countries and it’s not good for OECD countries. In fact, the only ones to benefit from a patchwork solution are the corporations, corrupt officials, and criminals who will take advantage of the asymmetric information.”
“Although OECD officials claim that everyone had a “seat at the table” during these processes, it’s become apparent that some chairs were closer to the table than others,” McConnell added.
Christian Freymeyer (U.S.)
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Verena Von Derschau (Europe)
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Notes to Editors:
 The Financial Transparency Coalition is a global network of nine NGOs spanning five continents, 150 allied organizations, and 13 governments. We work to curtail illicit financial flows through the promotion of a transparent, accountable, and sustainable financial system that works for everyone.