Tax Havens Face Global Crackdown: OECD Chief
A global crackdown on bank secrecy and offshore tax havens is gaining steam as a result of the worldwide financial crisis, according to the head of the worldwide organization that is spearheading the effort.
Angel Gurria, Secretary-General of the 30-nation Organization for Economic Cooperation and Development, the OECD, tells CNBC there is increasingly "nowhere to hide" for tax cheats.
The OECD has gathered representatives of 87 countries—OECD members and others—in Mexico City for a two-day forum aimed at strengthening global curbs on tax havens. All 87 countries have at least committed to implent the OECD's standards for sharing information on banking and business records of suspected tax evaders, Gurria said.
It is a far cry from just a few years ago, when many countries closely guarded their offshore financial sectors because of all the revenue they generated. But Gurria says the financial meltdown changed everything.
(See the accompanying video for the complete interview.)
"There is a worldwide crisis, the worst that we have ever seen in our lifetimes," Gurria told CNBC in an interview. "Every country is now asking their citizens to either tighten their belts, cut their expenditures, or in some cases pay more taxes."
At the Mexico City meeting—which was moved at the last minute from the resort city of Los Cabos due to the approaching Hurricane Jimena—representatives are trying to agree on a mechanism that will give some teeth to the OECD's longstanding efforts to rein in tax havens.
Among the items under consideration are a central council that will make certain members are sticking to the rules, a peer review system among the countries, and broadening memebership in the OECD's tax transparency forum. The recommendations will be forwarded to the G20 finance ministers, who meet later this week.
The effort to reform tax havens got a big boost earlier this year when Switzerland, whose bank secrecy laws are legendary, agreed to sign onto the international standard. Last month, the Swiss agreed to a settlement with U.S. authorities that could lead to the disclosure of the names of more than 4,500 suspected tax cheats with accounts at UBS.
But Gurria says these efforts are just the start of what he hopes will be a more level playing field on global taxation. "Because there is nowhere to hide, maybe people will feel less inclined to put their money elsewhere," Gurria said.
The crackdown has drawn criticism from conservative groups like the Cato Institute, which dispatched Senior Fellow Dan Mitchell to the meeting to "counsel" representatives of low-tax jurisdictions against what the group calls "coercion" by the OECD.
Gurria rejects the criticism, saying that "free flow of capital" is one of the effort's core principles.