SwissLeaks money connected to Kenya is six and half times higher share of GDP than the money connected to Spain
In less than two weeks, G20 Finance Ministers will sit down to dinner, but developing countries won’t even have a seat at the table
The ‘Swissleaks’ scandal shows poor countries are likely to be damaged much more than rich ones, according to a new analysis of the leaked HSBC Swiss account information. Campaigners say the evidence strengthens developing nations’ urgent need to know about their citizens’ foreign bank accounts, but a G20 Finance Ministers meeting next week looks set to keep them in the dark.
While all the focus on Swissleaks so far has been on the huge sums of money hidden from places like the US, UK, France and Spain, SwissLeaks Reviewed, the joint project of Christian Aid and the Financial Transparency Coalition, re-examined the SwissLeaks data as a percentage of a country’s GDP. The results were staggering. “Because the totals aren’t huge no real attention has been paid to the cash from developing countries in HSBC Switzerland, yet proportionally Senegal has nearly three times as much in HSBC Switzerland as France, and more than 10 times as much as Germany; similarly outsized proportions run true for many developing countries,” said Joseph Stead, Senior Economic Advisor at Christian Aid. “We shouldn’t be ignoring this, and neither should the G20”
Finance ministers and Central Bankers of G20 nations are gathering on 9 October to put the final touches on a plan to cut cross-border tax evasion, but this new interpretation of the data shows just how much more developing countries have to lose, and why they must be a central voice in designing solutions for the future.
“The goal of automatic exchange of financial information between governments is laudable, but requirements of the OECD system will end up acting as barriers to developing country inclusion,” said Stead. “When you look at SwissLeaks money in relation to a country’s economy, it’s clear why we can’t let this happen; tax haven banks like HSBC Switzerland are hiding proportionally a much larger amount of money, and potentially depriving developing countries of significant, desperately needed tax revenues ”
“ICIJ’s SwissLeaks investigation was monumental to the broader discussion on illicit flows and tax evasion, but much of the initial media coverage centered around money in places like the U.S., France, and Spain,” said Christian Freymeyer, Press & Digital Media Coordinator for the Financial Transparency Coalition. “We wanted to use the same data, but visualize it differently, to help demonstrate the scale of the problem for developing countries, and why the fact that they don’t have a say in the global standard setting process is cause for concern.”
The G20 and OECD are finalizing the Common Reporting Standard (CRS) on automatic information exchange, which will be formally adopted at the G20 Leaders Summit in November. But questions linger about the inclusion of low-income countries, who may not have the technology or capacity to meet some of the requirements. The CRS’ immediate reciprocity clause, which says that a government can only receive information if they’re able to send information about their own country’s financial system, is perhaps the biggest deterrent.
“Ninety-five per cent of the world’s offshore activity is in high income countries, and just 0.05 per cent is in low-income countries. The clear problem is money held in banks in rich countries, so it’s hypocritical for those same rich counties to refuse to consider a temporary period of non-reciprocity where developing countries could simply receive information about their own citizens’ money abroad,” added Stead. “The OECD is essentially asking low income countries to solve a problem that doesn’t exist.”
“As important as the SwissLeaks media coverage was to stir policy debate in Europe and the US, a closer look at the data reveals some major constraints and shortcomings of the OECD’s plan to fight cross-border tax evasion,” added Freymeyer.
“We also hope it will help focus attention on Switzerland’s policies; so far they have suggested that no matter what developing countries do to join the exchange, Switzerland is unlikely to share information with them, as there is no political or economic necessity to do so. While that may be true for Switzerland, this data shows it’s not the case for developing countries, where there’s a clear economic need for this information” added Stead.
Source: Financial Transparency Coalition