New OECD standards criticized

(CNS Business): An organisation that campaigns for transparency in the international financial system has criticised the Organization for Economic Cooperation and Development’s released detailed guidelines, released Monday, on the common reporting standard for automatic exchange of financial information. The Financial Transparency Coalition (FTC) said the OECD plan “inches closer to implementation of a global standard but continues to keep developing countries looking in from the outside”.

Rather than offer a period of non-reciprocity, where developing countries could simply receive financial data, the only mention of non-reciprocity agreements is catered to tax havens, the FTC said.

“Recognition of the benefits of non-reciprocity provisions for tax havens and not for developing countries is disappointing,” said Pooja Rangaprasad of the FTC and the Centre for Budget and Governance Accountability in Delhi. “Developing countries would potentially benefit greatly from being able to receive information from developed economies and tax havens, rather than the other way around.”

The FTC said that nothing in the standard — right down to the cost of purchasing the OECD document online — was put forth with developing countries in mind.

“Accessing the document is a perfect illustration of why this process needs to include low income countries from the start; it costs $73 to download the document—not an insignificant sum for a cash-strapped government, and a prohibitive amount for a citizen watchdog group,” said Porter McConnell, Manager of the Financial Transparency Coalition. “It’s hardly a convincing sign that the automatic exchange standard is ‘ready for implementation’ or open to everyone.”

OECD officials characterized the announcement as a move towards “a world in which tax cheats have nowhere left to hide”, but the organisation said details present a different picture. While a multilateral agreement for information exchange is one option put on the table, the OECD leaves room for countries to opt for bilateral agreements, opening the door to further exclusion.

Just as the scope of countries involved shouldn’t be limited, neither should the types of illicit flows addressed with the data, the FTC said. The same system that helps tax evaders keep their money out of reach also enables the corrupt and the criminal to move money into anonymous companies and hidden bank accounts, perpetuating the problem of illicit financial flows.

“Around a trillion dollars left the African continent in illicit flows over the past thirty years. The only way sums like that can be brought back into developing country economies, to create jobs and be taxed properly for roads and schools, is by including developing countries in information exchange from the outset,” said McConnell. “The current guidelines don’t do enough to upset the old guard of financial secrecy, or challenge jurisdictions that have made their millions through sheltering illicit money.”

Tags: OECD, tax

Category: Economy, Financial Services