26 août 2009
OECD Puts Tax Cheats on Radar
OECD Puts Tax Cheats on Radar
By BOB DAVIS WSJ
WASHINGTON -- The Organization for Economic Cooperation and Development is proposing to greatly strengthen an informal tax-information body as a way to crack down on tax cheating internationally.At a Sept. 1 session in Los Cabos, Mexico, the OECD will press to turn the Global Forum on tax-information sharing, a loose grouping of 84 nations, into a formal international institution with a permanent staff of examiners.
The forum would review whether members are aiding one another in cases involving tax evasion internationally. In particular, the forum would examine whether members are living up to their obligations under tax-exchange agreements, and make suggestions on how to improve.
"We hope to put in place a restructured Global Forum," said Pascal Saint-Amans, who heads the OECD's international tax-cooperation division. The forum would use "a peer-review process to put peer pressure [on countries] to increase transparency and [promote] the full exchange of information for tax purposes," he said.
Under the OECD plan, Global Forum examiners would review a country's compliance with its tax-information-sharing agreements and issue a report, which would be discussed in sessions with other forum members. The idea is to pressure recalcitrant governments to be more forthcoming.
The U.S. is lobbying for the measure, but it is far from clear that many developing nations, and especially tax havens, would back a more powerful role for the Global Forum.
One issue to be resolved: Can a country block a negative review from being published? Another: Although even a more muscular Global Forum would work by consensus, does that mean a single member could stop an initiative?
According to a draft report, the OECD urges a "flexible approach to consensus," so that one country can't block publication of a review.
"For the Global Forum to maintain a strong leadership role," the OECD draft said, "it is critical that jurisdictions which refuse to make progress toward full transparency and effective exchange of information would not be in a position to block the work." The OECD report suggests that such countries could be thrown out of the Global Forum. That could be a strong deterrent if the U.S. and countries in Europe reduce legal ties with such outliers.
Richard Murphy, director of Tax Research LLP, a consulting firm outside London, said a more muscular Global Forum could become "an embryonic world tax authority." But OECD officials said their goals are more modest, and the Global Forum wouldn't try to make tax rates consistent globally or take up other issues of tax reform.
The proposal is part of a continuing effort by the OECD to carve a substantial role for itself. The OECD was founded in 1947 to carry out the Marshall Plan of aid to war-ravaged Europe, but in recent years has been known mostly for keeping detailed statistics on its 30 members, and creating voluntary codes of conduct.
International tax evasion, though, is politically charged because nations tussle over the prospective revenue and often want to keep the information secret. The U.S. has been fighting Switzerland recently, for instance, over U.S. demands to hand over client data.
Even a souped-up Global Forum would have a difficult time in making a difference. Under tax-sharing agreements, authorities from one country must make very detailed requests before the tax authorities in another nation are obligated to turn over information.
The standard is so high, argues Mr. Murphy, that the authorities in the home government would probably have enough information to prosecute a tax cheat even without the help of the other jurisdiction. He says that basic information on financial accounts ought to be automatically shared among nations.
But Mr. Saint-Amans, the OECD official, said tax-sharing agreements will help investigators who otherwise wouldn't be able to follow a trail overseas.
The OECD effort builds on an April initiative by leaders of the Group of 20 industrialized and developing nations. At the G-20 meeting in London, the OECD published a blacklist of countries that didn't meet international standards on sharing tax information, and singled out Costa Rica, Malaysia, Philippines and Uruguay. Since then those four countries, as well as several others, have made progress, by signing agreements to share tax information.
Write to Bob Davis at email@example.com