ECOSOC Side Meeting 23Jul07 - PowerPoint PPT Presentation
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ECOSOC Side Meeting 23Jul07
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Title: ECOSOC Side Meeting 23Jul07 Author: M Couch Last modified by: United Nations Created Date: 5/13/2004 8:57:14 AM Document presentation format – PowerPoint PPT presentation
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Title: ECOSOC Side Meeting 23Jul07
1
Tax Avoidance Evasion from the Perspective of a
Small International Financial Services Centre Dr
Malcolm Couch Isle of Man Assessor of Income Tax
Side Event to UN ECOSOC Meeting, Geneva, 23 July
2007
2
Introduction
- All countries have people and businesses who
either fail to comply with tax law or in some
cases wilfully break it - Financial markets are increasingly globalised
- Criminal activity has also become increasingly
multinational and resident to an extent within
the global financial market
3
Introduction (2)
- Dirty money may account for 1 trillion of
cross-border capital flows each year (Raymond
Baker) - Sources are corruption, criminality and illicit
commerce - Any country can be part of the footprint of these
capital flows
4
Introduction (3)
- As an example of the indiscriminate global impact
of dirty money, consider"Criminals seeking to
launder money, evade taxes or commit other crimes
want to cloak their actions in secrecy, and right
now, that's exactly what they get when they
establish a US shell company." (Carl Levin, US
Senator)
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Introduction (4)
- Raymond Baker has called on the USA to state that
it welcomes money that is legally earned and
transferred and that will be legally employed,
but it will not be a safe haven for dirty money. - Baker suggests eight measures should be taken
within the US jurisdiction to improve its
financial system
6
Introduction (5)
- The concern of national tax authorities to
ensure their fair share of the tax base of
international business is also counterbalanced by
concerns to ensure their country maintains its
international competitiveness in attracting
investments and as a base for such business (Sol
Picciotto)
7
Terminology
- The debate about tax evasion and avoidance almost
always includes a focus on tax havens,
offshore and offshore finance centres (OFCs) - What do these terms mean?
- There cant be anything intrinsically wrong with
being a financial centre of excellence!
8
Terminology (2)
- A 1987 Report by the OECD recognised the
difficulties involved in providing an objective
definition of a tax haven. That Report concluded
that a good indicator that a country is playing
the role of a tax haven is where the country or
territory offers itself or is generally
recognised as a tax haven this is known as the
reputation test (OECD)
9
Terminology (3)
- there is no unanimity on what constitutes an
OFC. While authors have proposed various lists
of what they consider to be OFCs, an empirical
framework for uniform classification does not
exist. (Ahmed Zoromé, IMF, April 2007) - There does not exist a single, unambiguous
definition of a tax haven or an OFC. (Tax
Justice Network, July 2007)
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Terminology - Conclusion
- If everyone knows that they cannot define a tax
haven, offshore or OFC, why do they bother
trying? - Stigmatisation serves a useful purpose the
scapegoat carries the sins of others
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OECD
- some OFCs will have a secure future, not as
concealment centres, but as service centres
that have carved out niche markets in which
activities can thrive in a lightly regulated,
tax-neutral environment. Those that continue in
the old way of offering themselves up as places
in which home taxes can be avoided will, however,
in the authors opinion, face extinction.
(Jeffrey Owens, OECD, December 2006)
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OECD (2)
- Owens again (January 2007)if you want to be a
serious player in the international environment
not going for sort of the dark side of this game,
the illegal activities, the money laundering, the
tax evasion if you want to be a serious
offshore financial centre, the key thing is
reputation. And if you have a reputation for
being a place thats a bit seedy, without
transparency, being prepared in fact to take on
illegitimate transactions, then what youll find
is that the legitimate business will not come
your way.
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UN
- The UN Committee of Experts on International
Cooperation in Tax Matters considered at their
meeting in 2006 the possibility of a tax code of
conduct that might- set a moral tone for
international tax communityundermine the social
acceptance of international tax avoidance and
evasion
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UN(2)
- Code of conduct concepts (continued)- give moral
support to governments that wish to conform to
international standards of conduct- create a
level playing field for low-tax countries that
are meeting their international obligations by
putting pressure on non-complying countries to
meet their own obligations
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Summary
- Global financial crime, including tax crime, is a
major problem running alongside the legitimate
international financial system - Ultimately, effective action to combat global
financial crime will be founded on international
cooperation, but may also require individual
countries to make domestic legislative changes
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Summary (2)
- Benchmark standards in international tax
cooperation should be developed by a broad
coalition of countries seeking to understand the
underlying problem areas and treating each other
with respect UN sponsorship of such work would
give it great credibility - Standards should apply to all, and should define
the legitimate global economic community
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Contact
- Malcolm Couch can be contacted viae-mail at
malcolm.couch_at_gov.imphone on 44 (1624) 685355
(direct line)
