• The G20, Tax and Transparency

    Posted by Ben

    25 September, 2014

    The G20 Finance Ministers and Central Bankers met over the weekend in balmy Cairns.

    Sadly, they weren't given many opportunities to work on their tans.

    They were too busy discussing plans to invest in infrastructure, try to increase global economic growth, and take a few more steps to improve transparency in international finance, and increase the prospects for countries trying to get multinational companies to pay their fair share of tax.

    Their communiqué doesn't include any major breakthroughs, but there has been progress on the A-B-Cs of tackling tax dodging.

    So I thought it would be worth taking some time to sketch the progress we've seen so far, and highlight why it's still vital for people to be active in campaigning on these issues.

    Joe Hockey at G20 Finance Ministers' MeetingJoe Hockey at G20 Finance Ministers' Meeting
    (Image source: www.abc.net.au)

    Automatic Exchange of Information – which will help to catch and limit people's use of overseas investments and accounts to avoid tax – has been adopted as the new global standard. It's not quite the "end to banking secrecy" trumpeted by the OECD, but it's a very welcome step forward.

    The pitfall is that developing countries may not be able to use and benefit from the system, as it requires participation in multilateral or bilateral treaties which may not necessarily be to their advantage and sets standards for reciprocity which the poorest nations may not be able to – and shouldn't have to – meet.

    Developed nations have made various statements about the importance of supporting developing countries financially and through capacity-building. However, until we see actual pledges made and developing countries actually receiving useful information from the developed countries where corruptly-acquired cash or avoided tax is stashed, campaigners need to keep the pressure up.

    Beneficial Ownership Disclosure – which will help identify the true owners and beneficiaries of anonymous companies and trusts (which are at the heart of so much global crime and tax evasion) – was mentioned briefly by the G20 finance ministers but no concrete steps were taken.

    However, an increasing number of countries are setting up public registers of benficial ownership. The European Union will require all companies registered in member states to list their true owners and beneficiaries in a publicly-accessible register from 2015 – building on commitments already made by the United Kingdom and France.

    Transparency International have launched a whole campaign focused solely on "unmasking the corrupt" by creating these kinds of public registers. Australia can, and should, establish such a register here so that the corrupt and criminal are not able to use anonymous companies and trusts to hide illicit wealth.

    Country-by-Country Reporting – which will make it easier for governments to see the true scope and activities of multinational companies – was not even mentioned by the G20 Finance Ministers, though it now has a draft template developed by the OECD, which the United Kingdom has committed to using.

    European banks and financial institutions are going to have to report on their operations on a country-by-country basis from 2015 and US and European mining and oil companies are required to report all payments to governments.

    The pitfall here is that the OECD template requires all information in these reports to remain confidential between multinational companies and governments. This will vastly limit their usefulness to developing country governments and to civil society who want to both hold companies to account for the taxes they should pay and hold their governments to account for the revenue they receive.

    Australia needs to commit to implementing country-by-country reporting for multinational companies registered here, and to making as much of that information public as possible (given there might be some issues around commercial confidentiality).

    So, we need to keep raising our voices for a fair international tax system in which all pay their share and which benefits the poorest nations. If you haven't already joined the global online action to shine the light on tax dodging and corruption, now's a great moment to do so. Or join us in Brisbane in November – when the G20 leaders – meet.

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    Ben Thurley is Micah Challenge Australia's Political Engagement Coordinator