Yves here. Nicholas Shaxsons landmark book on tax havens, Treasure Island, described how the US was the biggest sponsor of what Shaxson called offshore, or tax havens and tax secrecy. He tells us how the US is working to keep it that way.
By Nicholas Shaxson. Adapted from a post by the Tax Justice Network.
The U.S., seen from space
If people stash their wealth or earn income overseas, that is just fine as long as their tax authorities get the information they need to tax that wealth or income according to the law, and as long as money laundering and financial crimes can be effectively tracked, and so on. Where there are cross-border barriers to legitimate tax collection, law enforcement and other instruments of democratic societies, then there is an offshore problem.
The only credible way to provide the necessary information is through so-called automatic information exchange (AIE), where governments make sure the necessary information is available across borders, as a matter of routine.
For years, those who advocated AIE were ignored or even ridiculed. Pie in the sky, many said. The OECD, the club of rich countries that dominates international rule-making on tax and tax-related information sharing, was for years pushing its so-called Internationally Accepted Standard which was, well, the internationally accepted standard for cross-border information exchange, despite being only slightly better than useless.
In the past couple of years, however, the world has turned.
The OECD is now in the middle of putting in place a system known as the Common Reporting Standards (CRS) to implement automatic information exchange (AIE). The CRS is the first ever potentially global system of AIE, and although it has serious shortcomings and loopholes, it is potentially a major step forwards from a largely transparency-free past.
Meanwhile the European Union had been moving ahead with plans to beef up its own, older schemes for AIE, notably through amendments to tighten up its loophole-ridden Savings Tax Directive and other related initiatives (for an overview of that, see here.) The United States, for its part, has been rumbling forwards with its Foreign Account Tax Compliance Act (FATCA), which is, at least technically speaking from a self-interested U.S. perspective, fairly strong. (In fact, the OECDs CRS is modeled on FATCA.)
But and here comes a big but how do these different initiatives mesh together? Might anything fall between the cracks?
Read this article:
Tax Haven USA: The Vortex-Shaped Hole in Global Financial Transparency