All G20 Countries Expect to Be Actively Exchanging Information Automatically by End of 2015
Promises to Aid Developing Counties with Implementation Welcome, but More Must be Done to Help World’s Poorest
G20 Fails to Tackle Anonymous Shell Companies
WASHINGTON, DC – The G20 leaders agreed today to begin sharing tax information automatically between themselves—expecting to be able to implement the agreement by the end of 2015—in a move hailed by Global Financial Integrity (GFI) as a major advancement in the fight against tax evasion. GFI welcomed the commitment by world leaders to assist low-income countries’ effort to additionally ensure their eventual participation in the automatic exchange of tax information. However, the Washington, DC-based research and advocacy group expressed disappointment in the G20 declaration’s omission of a timeframe to include developing countries in such a system.
“This is a major advancement in the battle against tax evasion,” said Heather Lowe, GFI’s Legal Counsel and Director of Government Affairs. “Four or five years ago, the idea of automatically exchanging tax information wasn’t even on the table. Now, the twenty largest economies in the world have announced that they will begin sharing information automatically within two to three years. This is really a sea change.”
“That said, there are more countries in the world,” continued Ms. Lowe. “The G20 today committed to extending automatic exchange of information to developing countries and the creation of a multilateral treaty to achieve this. The G20 must commit to including developing countries in the committee tasked with drafting the treaty, ensuring that its terms are both beneficial to and implementable by developing countries. This commitment can’t wait until the next finance minister’s meeting in February.”
Gaps in the G20’s Effort to Curtail Illicit Financial Flows
GFI noted that while the G20 took historic steps on the issues of tax avoidance and tax evasion today, and highlighted the link between illicit financial flows and tax issues, there are several important gaps in the overall effort to curtail illicit financial flows, which Global Financial Integrity estimates cost developing countries US$5.86 trillion from 2001-2010.
One of the most common methods for moving illicit money across international borders is trade misinvoicing, also known as trade mispricing or trade-based money laundering. GFI estimates that developing countries lose US$470 billion per year due to trade misinvoicing.
“Trade misinvoicing is not only used for tax evasion. Drug traffickers, corrupt public officials, and all sorts of illicit actors use it routinely to siphon funds out of developing countries.” Ms. Lowe continued, “The G20 Leaders Declaration included a whole section on enhancing multilateral trade, but failed to devote even one word to combating trade misinvoicing. The logical next step in addressing the massive problem of illicit financial flows is to attack trade misinvoicing at its roots.”
Further, GFI expressed disappointment that the G20 did not approach the issue of beneficial ownership with the same urgency and zeal that it showed the tax issues. The Leaders Declaration called for countries to implement to meet the Financial Action Task Force (FATF) standards regarding the beneficial owners of companies and other legal arrangements. However, it did not call for strengthening the FATF standards on beneficial ownership or for registries of ownership information to be available to the public.
“The minimum FATF standards on beneficial ownership are not strong enough to make a meaningful impact on illicit financial flows, as we made it clear at the time they were adopted. The G20 needs to move forward with significantly stronger standards. Further, while registries of beneficial ownership information available to law enforcement and tax authorities would be a step forward, true accountability requires public registries.”