Empty OECD ‘tax haven’ blacklist undermines progress

The OECD has today published a list of “non-cooperative jurisdictions” on tax ahead of the leaders G20 leaders summit in Hamburg, and hailed the “great progress” being made on international efforts to tackle tax evasion. The list only contains one country, Trinidad and Tobago.

The Tax Justice Network condemns the empty ‘tax haven’ blacklist. Far from the success which is being trumpeted, this meaningless gesture instead threatens the genuine progress that the OECD has in fact been making.

The report hails ‘massive progress towards the exchange of information on request standard’, despite the fact that this standard has been superseded by the superior alternative of automatic information exchange. Automatic exchange has been a key part of the Tax Justice Network’s policy platform since our establishment in 2003, and although long dismissed as utopian, is now the basis for OECD’s Common Reporting Standard which will come into action this year.

The key finding of the report is that: “As a result of the significant progress made since April 2016, only one jurisdiction (Trinidad and Tobago) still meets the current criteria to be considered not to have made sufficient progress towards satisfactory implementation of the agreed tax transparency standards.”

The global standard, which is preferred by the OECD is now cooperation through automatic, multilateral exchange of tax information between tax authorities. Many jurisdictions taking part in this system have failed to commit to information sharing outside a small group of rich economies, so there are grave challenges to ensure lower-income countries benefit.

But most worryingly, the biggest financial centre in the world – and the biggest OECD member – has flatly refused to participate in automatic exchange. The USA demands automatic provision of information from all others, and provides only a few countries with anything in exchange under the skewed, bilateral arrangements agreed in support of the Foreign Account Tax Compliance Act (FATCA). The OECD report does note, in the FAQ, the USA’s rejection of the CRS – but erroneously claims that ” the US is automatically exchanging certain information under its many bilateral agreements implementing FATCA and that each of those agreements also includes a commitment to full reciprocity (which would deliver information similar to that exchanged under the CRS).”

Alex Cobham, chief executive of TJN, said:

Over the last few years, the OECD has indeed made great progress in some areas of tax transparency – but today’s announcement is not a part of that, it actively undermines it. Since the financial crisis, the OECD and its members have finally embraced the Tax Justice Network’s longstanding position that only multilateral, automatic exchange of information can support an effective antidote to financial secrecy, and all of the tax abuse, corruption and other crime that goes with it. It’s disheartening then to see the OECD fall back into the old pattern of creating ‘tax haven’ blacklists on the basis of criteria that are so weak as to be near enough meaningless, and then declaring success when the list is empty.

It’s a simple matter to look at the multilateral arrangements for automatic exchange of information that will kick in from this year, and to assess each jurisdiction in terms of the share of the world with which they intend to provide information. This reveals immediately that many of the usual suspects such as Switzerland, including many OECD members, are simply not going to extend transparency further than they absolutely have to. Inevitably, lower-income countries are systematically being excluded. And the elephant in the room? The OECD’s biggest member, the United States, has positioned itself to demand information from everyone else, while refusing to reciprocate. If you were going to produce a tax haven blacklist with only one member, it wouldn’t be a small Caribbean island – it would be tax haven USA.

Notes to editors

1. A detailed critique of the OECD blacklist approach can be found here: https://www.taxjustice.net/2016/07/20/oecd-another-go-hopeless-politicised-tax-haven-blacklisting/.
2. For more detail on the emergence of tax haven USA, see: https://www.taxjustice.net/2015/01/26/loophole-usa-vortex-shaped-hole-global-financial-transparency-2/. This piece also includes links to all subsequent updates, to June 2017.