Statement from the Task Force on Financial Integrity and Economic Development for World Leaders at Davos
January 26th, 2012
January 26th, 2012
The challenge to world leaders at Davos is to restore faith in the financial system by implementing a manifesto for economic justice
World leaders’ inability to articulate a narrative beyond a long, hard march out of economic malaise ultimately caused by politicians’ and regulators’ failure to adequately supervise the financial system is resulting in widespread disillusionment with mainstream politics that threatens to undermine faith in democracy. World leaders need to respond quickly, and the finance community must play its role.
Raymond Baker, director of the Task Force on Financial Integrity and Economic Development, said: “There is money in the global financial system that, if accessed and used wisely, could go a long way to mop up deficits and reinvigorate the global economy. That treasure trove includes the $3.1tn of tax, equivalent to 5.1% of global GDP, which is illegally evaded in 145 countries, covering 98.2% of the world’s population, as well as the billions that go missing due to corruption. Developing countries alone have lost $903bn in illicit outflows during 2009.
“Tax havens play a facilitating role in moving illicit money around the globe. These secrecy jurisdictions act as cover from international tax authorities. Disturbingly, the obstacles placed by the global financial system that would allow individual countries to track down and repatriate this cash are prohibitively burdensome. This is why the Task Force on Financial Integrity and Economic Development believes a new age of financial transparency and accountability is required.”
The Task Force believes five key reforms would lay the foundations for this:
1. The rapid introduction of multilateral automatic tax information exchange between tax agencies in every single jurisdiction. This would ensure money illegally held offshore was easily identified and accounted for.
2. The introduction of new levels of financial transparency requiring the public disclosure of the ultimate human beneficiaries of companies, trusts and foundations. This is needed to prevent the further subversion of countries’ tax bases whether by high net worth individuals, businesses, corrupt politicians, criminals or terrorists. It is also required to restore faith in the rule of law and the democratic process as the current non-disclosure of beneficial ownership is corruption’s best friend.
3. The global introduction of country-by-country reporting so that every company has to publicly state financial details relating to its turnover, profits, costs, employees and taxes in every jurisdiction it operates in where its revenues exceed $5m. It is astounding that in the 21st century, it is impossible for citizens in many resource-rich nations to establish whether their country has got a fair deal from its oil, gas or minerals.
4. Concerted international action needs to be taken to ensure the hundreds of billions of dollars lost to exchequers by companies artificially inflating their costs and deflating profits through intra-company transactions – known as transfer mispricing – is identified, contained and reduced.
5. The harmonisation and codification of money-laundering laws to a restrictive level – and their proper enforcement. Even the City of London shows brazen disregard for rules to stop money laundering, according to a report last June by the UK’s Financial Services Authority.
Notes to Editors:
🚨@FinTrCo & 36 global civil society orgs call for US to tackle its black hole of financial secrecy undermining demo… https://t.co/c9YXSj1fUm
- Wednesday Mar 29 - 2:32pm