World Economy

51 States Sign Deal to End Tax Evasion

51 States Sign Deal to End Tax Evasion51 States Sign Deal to End Tax Evasion

Finance ministers from over 51 countries signed an agreement in a step closer to ending the dark financial underworld of tax-evasion and money-laundering, a top priority for austerity-hit countries in Europe as they seek to fill depleted state coffers. Another 30 countries pledged to join by 2018.

The deal is called the Multilateral Competent Authority Agreement and will look to build a collective exchange of bank accounts, taxes, assets, and income held outside local tax jurisdictions, RT reported.

The two-day summit was organized by the Organization for Economic Cooperation and Development (OECD) and the Global Forum on Transparency and Exchange of Information for Tax Purposes. It was hosted by German Finance Minister Wolfgang Schauble and held in Berlin.

"Banking secrecy, in its old form, is obsolete," German Finance Minister Wolfgang Schaeuble said in an interview in Bild.

The practice is "no longer appropriate at a time when people can transfer their money all over the world at the press of a button via the internet," said Schauble.

While states supporting the initiative include Switzerland, Liechtenstein, the British Virgin Islands and the Cayman Islands, the US isn’t a signatory.

“The US have their own discussion,” German Finance Minister Wolfgang Schauble said. He stressed, though, that the U.S. Foreign Account Tax Compliance Act, or Fatca, had added momentum to the debate about automatic exchange of information in Europe, which helped lead to Wednesday’s deal.

Germany is a staunch opponent of bank secrecy by geography. On its southern border lie historically secretive Austria and Switzerland, and on the western frontier is Luxembourg, also known for its tight-lipped financial institutions.

“It is of enormous political consequence to recover the trust that the public today has lost after the crisis — with joblessness, growing inequality, with the low growth,” OECD Secretary-General Angel Gurria, said after a two-day conference.

Gurria said it is difficult to know how much states have lost to tax evasion, but the OECD estimates roughly 25 countries have gained about €37 billion ($47 billion) in tax revenue over the past five years from voluntary disclosure programs and other initiatives to combat offshore evasion.

The UK Chancellor of the Exchequer George Osborne called tax evasion a “scourge across the world” that can be tackled only with a global solution. He called on financial centers that haven’t signed, and the developing world, to support tax transparency.

Members like the Cayman Islands, the Virgin Islands and Liechtenstein – all notorious for being tax havens, signed the agreements.

Asset hideouts like Austria, Switzerland, and the Bahamas didn’t sign the agreement itself, but promised to join the initiative by 2018.