WASHINGTON, DC – Global Financial Integrity (GFI) lauded G20 Finance Ministers and Central Bank Governors Friday for prominently focusing on the issue of tax haven secrecy and strongly declaring that automatic exchange of tax information is “expected to be the standard” moving forward, but GFI expressed disappointment in the leaders’ failure to sufficiently address the issue of anonymous shell companies. The leaders released their communiqué Friday afternoon after two days of meetings in Washington ahead of the annual spring meetings of the World Bank and International Monetary Fund.
“Tax haven secrecy and anonymous shell companies facilitate crime, corruption, and tax evasion, costing the developing world roughly US$1 trillion in illicit outflows every year,” said GFI Director Raymond Baker, citing the organization’s research. “This secrecy costs the U.S. Treasury $150 billion annually in lost tax revenue, it siphoned $261 billion out of the Greek economy in the run-up to the Eurocrisis, and it drained $212 billion from Russia—the current chair of the G20—in the years following the collapse of the Soviet Union. Automatically exchanging tax information between countries and getting rid of anonymous shell companies would significantly curtail these illicit flows, bolstering government revenues in poor and rich nations alike.”
Automatic Exchange of Tax Information
“We are thrilled to see the G20 declare that the automatic exchange of tax information is expected to be the new global standard,” stated Heather Lowe, GFI’s Legal Counsel and Director of Government Affairs. “Automatic tax information exchange ensures that tax authorities and law enforcement have the necessary records they require to detect and deter billions of dollars in tax evading money.”
The G20’s statement follows a week after ten European nations—including, among others, France, Germany, Italy, Spain, and the United Kingdom—announced that they would begin a pilot program to exchange information automatically on a multilateral basis. The European nations also committed to promoting multilateral automatic information exchange as the new global standard, a move lauded by GFI.
“The next step is for the G20 is to explicitly endorse automatic exchange on a multilateral basis—as a number of European nations have done—as the global standard, moving beyond the significantly less effective system of bilateral exchange,” added Ms. Lowe.
Anonymous Shell Companies
While GFI welcomed the G20’s language on tax information exchange, officials at the organization were not pleased with the G20’s failure to make any meaningful progress on the issue of anonymous shell companies.
The G20 communiqué released today endorsed the Financial Action Task Force (FATF) standards for the disclosure of beneficial ownership information. GFI warns that the FATF standards are insufficient to eliminate anonymous shell companies and their abuse.
“In the nine months since the Los Cabos Summit, the G20 has completely failed to move the ball forward on the issue of anonymous shell companies,” noted. Ms. Lowe. “As long as G20 nations like the United States, United Kingdom, and others allow for the incorporation of anonymous shell companies, trusts, and foundations, they will continue to facilitate terrorism, sex slavery, and tax evasion. These phantom firms pose a systemic risk to our financial system, and they enable the most heinous crimes. I am very disappointed by the lack of progress on this issue.”