The globally concerted huge push by leading nations to detect and deter tax evasion through “offshore banks” has apparently failed, according to an analysis of banking industry data; reports Simon Bowers in the Guardian today.
Despite lofty rhetoric from the politicos (e.g. the OECD claimed: “The era of bank secrecy is over…It is now no longer possible to hide assets or income without risking detection.”); a tsunami of Tax Information Exchange Agreements (TIEAs) with “tax haven” countries; and various Tax Amnesty initiatives (e.g. the Liechtenstein Disclosure Facility and the Swiss Tax Agreement), the Bank of International Settlements (BIS) data shows bank accounts in tax havens still held US$2.7tn (£1.7tn) in 2011 – about the same amount as in 2007.
The academics who were given access to the BIS data, Niels Johannesen and Gabriel Zucman, concluded: “The G20 tax haven crackdown has … largely failed … Treaties have led to a modest relocation of bank deposits between tax havens but have not triggered significant flows of funds out of tax havens.”
Johannesen and Zucman’s study also pointed to the use of various structures spanning multiple tax havens. They say that US$550bn (i.e. about 25% of all bank deposits in tax havens) are owned by individuals or companies apparently situated in other tax havens. The British Virgin Islands (BVI) and Panama are the most popular jurisdictions for holding companies and other ownership structures; such as Foundations and Trusts.
The academics say the TIEAs lead to a 3.8% fall in the deposits held on behalf of individuals or companies from the treaty partner. But this money seems to simply move to jurisdictions that do not have the bi-lateral treaties! For example, Jersey signed 18 such treaties. Banking deposits in Jersey dropped by more than 50% ( $110bn) over 4 years;. Whereas Cyprus signed only 2 full tax co-operation treaties, and it saw banking deposit levels rise by 60%.
The Guardian is promoting more robust transparency treaties: which it thinks will “weed out tax evaders”.
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