Centre for Budget and Governance Accountability calls on governments across the world to commit to ending financial secrecy which is systemic in the international tax system, to ensure developing countries have sustainable revenue to finance development.
Delhi, November 6, 2017: A vast trove of 13.4 million leaked documents, referred to as ‘Paradise Papers’, published by the International Consortium of Investigative Journalists (ICIJ) and its partners in 67 countries is the latest revelation on the shadowy world of offshore banking. The new files from two offshore service providers, Bermuda-based Appleby and Singapore-based Asiaciti Trust, and company registries of 19 tax havens, crack the door open on the global shadow economy, where shell companies and an efficient industry of lawyers, bankers, accountants and intermediaries help large corporations, politicians, oligarchs and the wealthy to conduct business in highly secretive manners in jurisdictions known as tax havens. 714 Indians have been named in the Paradise Papers.
Lax financial regulations in countries and the existence of tax havens are not mere accidents – they point towards a deep systemic and structural flaw in the international tax system that allows such financial secrecy to persist. Tax havens provide secrecy and financial services for the creation and maintenance of shell companies, whose beneficial or true human owners are extremely difficult (or even impossible) to trace. Though offshore entities are not illegal, the secrecy associated with them lure kleptocrats, criminals, terror outfits and the rich who use these vehicles to launder their ill-gotten gains or avoid paying their fair share of taxes.
These are not victimless crimes – financial secrecy and tax avoidance, especially on part of those who can and should pay the most taxes, contribute towards low public revenue, undermine public health and education systems, and increase inequality and corruption. It is the poor and developing countries that are disproportionately impacted by global tax avoidance, as they end up losing greater proportions of their GDP to such activities. Estimates show that developing countries lose close to $1.5 trillion each year to illicit financial flows, and multi-national corporations are able to avoid paying $500 billion annually in taxes – most often using the complex web created by shell companies and tax havens.
In response to the leaks, Subrat Das, Executive Director of Centre for Budget and Governance Accountability (CBGA) said:
“Despite global attention and policy reform, the solutions crafted to address financial abuse remain piecemeal. Designed by the G20 and the OECD, tax transparency norms do not represent the interests of developing and low-income countries, and therefore do not benefit them.”
Centre for Budget and Governance Accountability calls on governments across the world to finally commit to ending financial secrecy by focusing on these measures:
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