Global Financial Integrity (GFI) today called upon G20 leaders meeting this week in Los Cabos, Mexico to tackle the issue of tax haven secrecy and the illicit financial flows it facilitates as a necessary means to ensuring stability in the international financial system.
As the European Debt Crisis progresses through its third year with no clear end in sight, GFI highlighted the fact that an opaque financial system comprised of tax haven secrecy, shell corporations, and trade mispricing cost Greece—ground zero of the continent’s economic woes—an estimated US$160 billion between 2000 and 2009.
“The focus of today’s summit is the stability of the global financial system,” said Raymond Baker, director of GFI. “World leaders cannot possibly stabilize the global economy without first tackling the system of tax haven secrecy, anonymous corporations, and trade mispricing that got us into this mess.”
Meanwhile, a January report from GFI also revealed that Mexico—the host of the this week’s summit—suffered US$872 billion in illicit outflows from 1970 through 2010, with annual outflows skyrocketing from an average of US$3.0 billion per year in the 1970s to a remarkable US$49.6 billion per year in the decade ending 2009. Much of this money ends-up in the United States.
GFI research indicates that crime, corruption, and tax evasion in the form of illicit financial flows cost the entire developing world an estimated US$1 trillion per year.
On Friday, GFI, 65 other civil society organizations, and 28,000 individuals from around the world sent a letter to Mexican President Felipe Calderόn, the current chair of the G20, urging him to make tax haven secrecy a priority of the summit.
The letter calls on the G20 to promote three policy measures:
public, national registries of the true beneficial owners of companies and foundations;
the multilateral and automatic exchange of tax information between tax jurisdictions, including tax havens; and
a new global accounting standard on country-by-country reporting which would require companies to report on their profits made and taxes paid in every country in which they operate, including tax havens.