Oct 19 2011

From horses’ mouths: why tax havens aren’t transparent

Posted by: Nick Shaxson in: Thoughts

(Sorry for the lack of posts recently; I was in Jersey, Norway and Finland, giving some talks.)

I said it in the Financial Times recently: the OECD’s information-sharing agreements — and the false appearance of tax haven transparency they have created — amount to a whitewash of tax havens. The havens have all been signing these so-called Tax Information Exchange Agreements (TIEAs) and then parading around saying ‘look how clean we are.’ (and by the way, we are not a tax haven either.)

Well, it ain’t true. The law firm Baker & McKenzie said it. The Tax Justice Network has said it for years. Now, a Caribbean-based correspondent sent me this, from Cayman News Service:

A panel of trust experts from Cayman, Guernsey, the UK, Switzerland and the Bahamas . . . [argued that] despite the tax information agreements signed by offshore centres in recent years however, there were still ways that trust professionals could protect beneficiaries and confidentiality because of the hoops tax authorities needed to go through to extract information . . . On the face of them TIEAs appeared “fearsome” with one tax authority forcing another to disclose information on foreign nationals, Shepherd noted, but actually there was a good deal that trust professionals could do to protect beneficiaries and honour obligations of confidentiality, citing a number of hoops that tax authorities needed to go through to extract information. . . . Julien Martel, from Butterfield in the Bahamas said that the issue about TIEAs was a “storm in a tea cup”and the issue did not come up frequently in conversation.”

And there is more in there. Further discussion from Tax Research. The OECD’s TIEAs are not useless, but they are the next best thing.I believe this system has actually been harmful in the long run, because they have created the appearance of a clean-up while leaving business (with a few exceptions) more or less as usual. The OECD’s Global Forum is doing a somewhat better job, but it’s miles away from delivering the massive change that’s needed.

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