European finance ministers announced a tax information exchange initiative at the World Bank-IMF (International Monetary Fund) Springs meeting in Washington, yesterday. The European Union’s five biggest economies, including Germany and Britain, have agreed to exchange information on beneficial ownership registers, and new registers of trusts. They are also urging other nations of the Group of 20 most advanced economies, to share information of offshore accounts, to ‘lift the veil of secrecy’ to make it harder for criminals and tax evaders to cheat the law.
The move comes in the aftermath of more than 11 million documents leaked from the Mossack Fonseca law firm, the so called Panama Papers leak. The Panama documents leak have placed tax evasion at the top of the international agenda by exposing how the rich and elite use shell companies to dodge taxes and financial obligations. It has caused global consternation, forcing unprecedented disclosures by various political leaders. When U.K. Prime Minister David Cameron was questioned about his family’s affairs, he had to release the tax returns.
The Panama Papers had lately claimed another political casualty: Spain’s acting industry minister Jose Manuel Soria resigned after his name was linked to offshore companies. The leak also costed Iceland Prime Minister his post.
Britain’s Treasury chief George Osborne admired the proposal of tax information exchange and described the deal as a breakthrough. He said, “It shows the benefit of working together. No single country can tackle international tax evasion alone.”
He said the measures mark ‘another hammer blow against those who hide their illegal tax evasion in the dark corners of the financial system’. The deal will make it more difficult for firms to dodge tax or funnel corrupt funds and allow for more effective investigation into financial wrongdoing.
The UK government has announced that it will make its register of beneficial ownership publicly available and easily accessed and searched, and is reported to be pushing the remaining four signatories to follow suit.
The measures were outlined in a joint letter from the five European finance ministers to the rest of the G20, which hopes to persuade Russia and China to join the deal.
It said: “In our view, this new initiative will take a significant step forward in improving the transparency of beneficial ownership information and in removing the veil of secrecy under which criminals operate. Of course, to be fully effective such an exchange would be on a global basis. We therefore hope that you will support this initiative and we can collectively call on the OECD, in cooperation with the Financial Action Task Force, to draw up a new global standard for such an exchange.”
The letter also called for the development of a system of interlinked beneficial ownership registries and a mandate for the OECD and FATF, an inter-governmental organization focused on combating money laundering, to develop common international standards for this.
The OECD’s general secretary Angel Gurria agreed that tax transparency standards need to be effectively implemented worldwide, with no exceptions. There should be ‘nowhere left to hide’, he said.