* Official queries $21-$32 trillion haven estimate
* OECD has no "magic number" for offshore tax evasion
* System too complex to be workable -accountant
* Tax authorities crack down
By Chris Vellacott and Sinead Cruise
LONDON, July 26 A global campaign to tax
trillions of dollars hidden in offshore tax havens has made
revolutionary progress, an official leading the drive said,
rejecting suggestions that the super rich are running rings
around Western authorities.
Pascal Saint-Amans, director of a unit at the Organisation
for Economic Cooperation and Development, also cast doubt on
estimates that the havens are illicitly sheltering wealth
equivalent to several hundred times the fortune of Bill Gates.
Leaders of the G20 group of leading Western and developing
nations launched the campaign three years ago, aiming to claw
back billions in lost tax revenue at a time when many
governments are trying to cut huge budget deficits.
Saint-Amans said his gut feeling was that before the G20's
initiative at its 2009 London summit, people could hide their
wealth in offshore havens without any risk of legal reprisals.
"Now you are at risk and that’s a major change. That’s a
revolution," Paris-based Saint-Amans told Reuters in a telephone
interview. Even if money is transferred abroad, rules improving
transparency have made it easier for the taxman to find it, said
Saint-Amans, whose unit is tasked with leading the Western
efforts to fight tax evasion.
The Tax Justice Network, a campaign group, estimated last
weekend that as much as $21 to $32 trillion of financial assets
are sheltered in offshore tax havens, representing up to $280
billion in lost income tax.
That total wealth would dwarf the fortune of Microsoft Corp
cofounder and philanthropist Bill Gates. In March Forbes
magazine ranked Gates second on its global rich list with total
wealth of a mere $61 billion. [ID:nL2E8E78DB]
Saint-Amans suggested the TJN estimates might be overstated.
"I was wondering where the equivalent of 450 Bill Gates are
hiding from everyone. It looks like the equivalent 20,000
unknown billionaires in the world or 200,000 people with net
worth of 100 million," he said.
The Scorpio Partnership, a consultancy that analyses the
global private wealth management industry, estimates the amount
of money held offshore by people worth at least $1 million at a
more modest $8-$9 trillion.
NO MAGIC NUMBER
Saint-Amans, who heads the OECD's Centre for Tax Policy and
Administration, acknowledged his organisation makes no
equivalent estimate. "I would rather spend the resource
improving the legal framework and putting an end to loopholes
than trying to find the magic number," he said.
In a statement accompanying its research, TJN criticised the
OECD and other international bodies for not doing enough to
track offshore wealth, saying it was scandalous that
institutions devoted so little research to the issue.
G20 leaders agreed at their London summit to crack down on
tax evasion and banking secrecy, and asked the OECD to publish
lists of tax havens according to how cooperative authorities
there are on releasing information about offshore wealth
There are now 89 countries on the OECD's "white list" of
jurisdictions that have implemented internationally agreed tax
standards. These jurisdictions have between them signed more
than 800 agreements on exchanging information with authorities
other countries, Saint-Amans said.
"Until 2009, countries said being secretive is justified and
fair. The change in the world is nobody says that any more, so
that is a big change," he said.
Western tax authorities have individually stepped up efforts
to net more money hidden abroad by their own citizens through a
series of amnesties targeting people with accounts in
jurisdictions such as Switzerland and Liechtenstein.
At the same time they have turned up the heat on citizens
suspected of tax evasion. This has included using details of
Swiss accounts originally stolen from HSBC by a former IT
employee that found their way into the hands of tax authorities
around Europe. [ID:nL5E7LD1Y2}
Britain's HMRC tax office expects an amnesty offering
leniency to people with accounts in Liechtenstein if they come
clean to raise about 3 billion pounds, while a similar deal on
Swiss accounts will bring in up to 7 billion pounds.
Campaigners argue that such initiatives will achieve only
limited success because a financial industry designed to ensure
confidentiality across multiple jurisdictions makes it
impossible to shut down tax fraud or money laundering.
"Anybody who’s serious about holding money offshore ... will
hold it through a trust," said Richard Murphy, a chartered
accountant and director of Tax Research, a think-tank.
"You’d have the trust in one territory, the company in
another territory, its directors in another territory and its
bank account in a fourth territory. So making an application for
information is not very simple."
TOO COMPLEX TO BE WORKABLE
Murphy dismissed the OECD's progress in cracking down on tax
havens, arguing that implementation of information exchange
between territories is limited in practice and the process too
complex to be workable.
"They’ve set up a system where it’s virtually impossible to
apply for information ... The OECD claiming they are making
progress is like checking the stable door has been shut way
after the horse bolted. Not just the horse, the entire stable
has bolted," he said.
The TJN research on offshore wealth - authored by James
Henry, a former chief economist at consultant McKinsey & Co -
highlights the "often unsavoury role" played by banks in
catering to rich individuals who want to hide money offshore.
Large private banks with offshore businesses reject the idea
they aid tax evasion.
"Our Code of Conduct explicitly says not to assist clients
in activities intended to breach their tax obligations," said a
spokesman for Swiss bank Credit Suisse CSGN.VX who declined to
comment specifically on the contents of the TJN report
But recent crackdowns by tax authorities in countries such
as Britain, the United States and Germany have proved
embarrassing for Swiss banks.
German tax authorities are investigating roughly 5,000
German clients of Credit Suisse while French officials have
searched the homes of UBS UBSN.VX employees. [ID:nL6E8IB7FC]
At least 11 Swiss banks suspected of helping wealthy
American clients dodge taxes are currently subject to a U.S.
Saint-Amans said the OECD's efforts have focused on engaging
with governments rather than imposing more supervision on
financial institutions. The complexity of the industry, he said,
meant that greater information exchange was the best way to
tackle people using banking secrecy to break the law.
"I’m not sure that nationalising the banking industry
throughout the world is the solution. The fact you have private
practitioners being involved in a sophisticated environment is
why you need to favour transparency and exchange of
information," he said.
Efforts to increase disclosure and combat both tax evasion
and money laundering by international bodies such as the OECD
and the Financial Action Task Force (FATF), a Paris-based
inter-governmental body, have focused on self regulation.
"We've tried to ensure that what we're talking about is not
to create some draconian system where we put a policeman in
every financial institution which would be impossible to do,"
said a senior source at the FATF, which was set up to combat
money laundering and terrorist financing.
Nick Matthews, anti-money laundering and offshore financial
industry specialist at Kinetic Partners, said purging the
world's financial system is "incredibly difficult".
"Clearly tax evasion leads to money laundering and is a
crime but you would have money laundering even if there was no
tax, because you still have proceeds from crime or corruption
polluting the financial system," he said.
"That is why I say that no bank would ever stand up and
claim that they are not being used to launder money. They
appreciate that they are only as strong as their weakest link."
(Additional reporting by Katharina Bart and Martin de Sa'Pinto
in Zurich; editing by David Stamp)
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