New global rules forcing companies to report taxable activities country-by-country publicly have been called for by a group of 300 prominent economists.
In a letter to world leaders, the group urges the UK to “take a lead” in the push for more tax transparency. Poor countries are the biggest losers from tax havens, they claim, BBC reported.
The letter’s signatories, coordinated by charity Oxfam, include best-selling author Thomas Piketty and 2015 Nobel Prize economics winner Angus Deaton.
The letter comes ahead of the UK government’s anti-corruption summit on Thursday, which politicians from 40 countries as well as World Bank and IMF representatives are expected to attend.
The economists—who include almost 50 professors from British universities—argue the UK’s position as summit host as well as its sovereignty over what it says is a third of the world’s tax havens makes it “uniquely placed” to take the lead.
Naming Real Beneficiaries
“We need new global agreements on issues such as public country-by-country reporting, including for tax havens,” the economists write in the letter.
“Governments must also put their own houses in order by ensuring that all the territories for which they are responsible make publicly available information about the real ‘beneficial’ owners of company and trusts,” they add.
The letter comes in the aftermath of the Panama Papers leak, which revealed how some rich people hide assets, sparking widespread condemnation that the authorities had failed to act.
One of the signatories, the economist Dr Ha-Joon Chang of the University of Cambridge, told the BBC that he signed the letter because he shared “the view that tax havens serve no useful purpose”.
Chang said: “These tax havens basically allow companies and certain individuals to free-ride on the rest of humanity.
“These companies and people make money in one country by using workers educated with public money, using roads, ports and other infrastructure paid for by the taxpayers of that country and moving the money to another country in a shell company which doesn’t really do any business there.”
Loopholes
Another high-profile signatory, Professor Jeffrey Sachs of Columbia University, also said that tax havens showed “how the rich and the powerful really control the levers of finance”.
He said: “Even with the secrecy, we’re in a more transparent world so I think our governments are being pushed harder and harder to crack down on these abuses.”
However, James Quarmby, a tax lawyer at the international law firm Stephenson Harwood, argued that offshore financial centers play an important role in international finance and trade.
He added: “There’s more money laundering going on in New York, Frankfurt and London than any of the finance centers and I don’t hear Sachs arguing for those jurisdictions to be shut down.”
Deeply Damaging
Oxfam said that more than half of the companies set up by Mossack Fonseca, the law firm in the Panama Papers leak, were incorporated in British Overseas Territories such as the British Virgin Islands.
“As long as British-linked tax havens continue to help the rich and powerful get away with dodging tax it will remain deeply damaging to the UK’s credibility as a leader in the fight against corruption and global poverty,” said Oxfam chief executive Mark Goldring.
Last month, tax and law enforcement agencies in the UK, Germany, France, Italy and Spain agreed to share data in a new crackdown on international tax dodging.
Under the deal, the five nations will exchange information regarding beneficial ownership registers, which show who really owns assets.
However, only the UK has so far committed to making this information public.
It has emerged that there has been an increase in the amount of money flowing offshore from developing countries, in particular Russia and China.
Research carried out by Columbia University professor James S. Henry for the Tax Justice Network found $12.1 trillion had been shifted out of emerging economies.
Offshore accounts belonging to Russian citizens totaled $1.3 trillion, while Chinese citizens, including those in Hong Kong and Macau, had $1.2 trillion sitting offshore.
