Financial Transparency Coalition

The OECD, a club of rich countries that dominates rule-setting for global financial transparency standards, recently published a Handbook for implementing its new global tool for countries to co-operate in fighting tax evasion, known as the Common Reporting Standard (CRS). The new handbook is part of a series of milestones in the CRS’ roll-out following its initial publication in February last year, and subsequent commentaries and further documentation.

On 15 September, TJN published a new report analysing the handbook, entitled OECD’s Handbook for Implementation of the CRS: TJN’s preliminary observations.

We have in the past broadly welcomed the CRS, but we have also outlined a number of major and minor loopholes and shortcomings in several areas, including difficulties for developing countries; trouble with trusts, and unhappy engagement with the United States.

Our new report, put together by a team at TJN with input from Mark Morris, is quite detailed and wonkish. We believe it contains the most comprehensive and penetrating public critique of the CRS in existence: as such, it has relevance beyond the CRS because it identifies a good range of generic technical loopholes and fixes for authorities and investigators around the world.

• Although many developing countries won’t be able to join the CRS any time soon, our proposal to have financial centres publish aggregated AEoI Statistics would at least let everyone know where their money is being hidden, without compromising any confidentiality. (We aren’t asking for individuals or entities to be publicly identified: just aggregate values held by residents of each country.) We want our template for these statistics to be adopted now, so that it can be ready when the first exchanges under the CRS take place in 2017. (In a letter to us the OECD said it would consider this idea, but added that this might have to wait till 2019.)
• We suggest that until developing countries participate actively financial centres should start exchanging some information spontaneously with them, at least regarding some high value accounts.
• Do something NOW about sham residency certificates. This is a huge loophole, as we’ve already noted. In short, once the CRS is up and running, wealthy taxpayers will say they are resident in a ‘fake’ jurisdiction somewhere (perhaps a small island in the Caribbean) and then all the information about them collected under the CRS will be sent to that fake jurisdiction instead of their ‘real’ residency. That fake jurisdiction will wink, and do nothing.  We suggest several ways to stop this.
• Eliminate ‘options’ that allow less reporting of information (such as thresholds of account balances, below which there is no reporting).

Once again, our new report is here.