G8 Analysis

Governments promise action on tax avoidance


Richard Murphy offers a cautious welcome to the G8 summit’s declaration on tax havens and corporate tax.


I went to the G20 in London in 2009. Gordon Brown promised the end of tax havens at that summit. I didn’t believe him. I was right not to do so.

Precisely because Gordon Brown was wrong in 2009, the G8 had to revisit the issue in Northern Ireland this year. I was one of very few people who wasn’t either a diplomat or an accredited journalist to attend this event.


A chance to end tax havens

The differences between this year and 2009 were obvious in a great many ways, not least in the final Lough Erne Declaration that Cameron presented at the end of the event. It hasn’t promised the end of tax havens, but rather surprisingly I think it has much more chance of doing so.

That needs some explanation. Even the kindest interpreter of the Declaration could not help but be struck by the fact it has no less than thirteen ‘shoulds’ in it and not a single ‘shall’ or ‘will’. It is at best then a statement of aspiration or intent. No one can call it a firm commitment.

But I admit that, weak as that seems, I think this might prove to be a seminal moment in the history of the campaign against tax havens and multinational company tax abuse. That is because of the background to the 2013 declaration, which differs so markedly with what was said in 2009.


Tax havens as an excuse

In 2009 the world’s leaders were looking for someone to blame for what had happened on their collective watch. Tax havens were an incredibly convenient and readily-to-hand excuse for the banking collapse of 2008. However, whilst ‘offshore’ indisputably exacerbated the 2008 crash, the banking crisis had its origins onshore. And that was the problem with Brown’s 2009 claims: the analysis underpinning it was wrong.

In 2013 the analysis underpinning the declaration is correct. What cannot be disputed is that Lough Erne marked the end of an era in the debate on tax havens. It can no longer be said that tax havens aren’t important: in a report to the G8 by the OECD, that organisation unambiguously admitted there were vast amounts of funds offshore on which tax was not paid.

Never again will it be possible for tax havens to say that they aren’t a problem; the world’s leaders have now acknowledged that they are – for exactly the reasons that civil society has always argued, which is that they deliberately undermine the tax revenues of other jurisdictions.


Multinational tax abuse

Likewise, the problem of multinational company tax avoidance is no longer in dispute. The G8 has said it is an issue that must be addressed by positive action. Again, the civil society campaigns and exposés on this issue have been justified. The world’s leaders have accepted that this is an issue that must be tackled.

In both cases the Lough Erne Declaration is not positive enough. However, whilst the G20 language in 2009 was good, the action plan from the OECD was dire on that occasion and wholly inadequate to meet any of the expectations created by
the world leaders.


Hope for change

This time the reverse is true: the world leaders are not promising what they cannot deliver. The agenda for many of them has only just got on the table. But the OECD is, this time, looking like it is minded to deliver. And that is what gives me hope.

The OECD has also now said that automatic information exchange is the standard of data exchange from tax havens (and other countries) that is to be expected in future. That is of enormous significance.

Only eighteen months ago countries like the UK were opposing this idea, but now espouse it. And automatic information exchange is important: it means tax havens must supply data to countries like the UK; those havens will not need to wait until another country asks for information, with that other country having to make its case for the data before hoping to get it. There are problems to solve on how the data is identified, but the argument that it must be delivered automatically has been won.

And the same is true on country-by-country reporting, which the G8 has now asked the OECD to make part of tax reporting – even though not, unfortunately as yet, in published accounts. Again, though, this is a massive breakthrough and, in both cases, considerably advances the time-scale for action on these issues.

And that is why I believe the G8 was important.

By itself it will deliver little and yet it has advanced the debate enormously, and that, I think, is worth a cautious welcome.