Tax Measures Proposed To Ease Poverty

October 7, 2010 International Tax CooperationOffshore BankingOffshore TaxationTax Havens

Monopoly JusticeWorldwide tax changes and transparency measures need to be implemented soon in order to fight capital flight from poverty-stricken nations and worldwide tax evasion.

Approximately USD 1 trillion worth of illicit capital outflows is experienced by developing nations every year, two thirds of which is attributed to tax evasion by multinationals companies. Curbing these outflows is essential for poorer countries, in order to mobilize the national economy and resources and eradicate local poverty. The information was provided at the recent annual conference of the Task Force on Financial Integrity and Economic Development (TFFIED) where several new international tax measures were proposed, which were claimed would serve to eradicate world poverty, international capital flight, and aid governments worldwide in achieving their economic goals.

While several suggestions were raised and discussed, the Task Force primarily backed three cooperative ideas of how to improve the current financial and tax system. It was proposed that a new tax be instated on all financial institutions on “anonymous wealth” held in “tax haven” jurisdictions. The idea was brought forward by James Henry, board member of the Tax Justice Network. He claimed that a significant impact could be made to worldwide poverty projects if financial institutions were to impose a modest 0.5 percent tax on all deposited assets, unless they have been explicitly proven to comply with their appropriate tax obligations. The new tax would work in unison with an information sharing system presented at the conference by Michel Aujean, former Director of Tax Policy at the European Commission. Under his proposal fiscal information should be shared automatically by tax authorities worldwide, in order to enforce greater transparency, and eradicate capital flight and tax evasion. The idea would be facilitated by a set of stringent accounting and reporting standards which would mandate that multinational companies report the profits they earn across all their operating jurisdictions.

James Henry added that the real “tax haven problem” is not only the low tax jurisdictions and small island nations that people first imagine, but routinely preformed tax evasion carried out and enabled by leading first world banks. He proposed that the USD 20 trillion currently deposited in tax havens is a product of large scale past tax evasion that was facilitated by “a global industry of pirate banking like … JPMorgan Chase, UBS, Credit Suisse, Citigroup, Morgan Standly, HSBC, Deutsche Bank, Barclays…” This makes the task of combating tax evasion and assisting developing nations more difficult, as governments across the world will now have to look inwards at their own financial systems and begin to remedy illicit actions from within.

Photo by mtsofan