11 November 2021
Category : Opinion
International cooperation and the fight against tax havens
The Pandora Papers scandal shows the need for public policies to act as an enforcer in the prevention of tax fraud
It would have been more difficult today for Zeus to ensure Pandora kept her box closed. Not so much for her and her insatiable curiosity as for the almost definitive conquest by mortals of the right to information. Transparency laws, which guarantee the right of people to knowledge, are increasingly becoming the spearhead of the modern rule of law in many countries. Not only can police and prosecutors ask questions – everybody has the means to inquire on where public money is spent and how the state’s coffers are being filled, with an ever greater direct voice when deciding the destination of some of these funds. This can only be good for democratic governance.
Information, this time released by journalistic research, is power. Beyond the “black lists” of tax evaders, the debate on the legality versus legitimacy of fiscal planning to pay less taxes and on the duty of politicians and public figures to set an example, information is a very powerful tool to create fair tax systems and shut off access to tax evasion.
In Latin America alone, this phenomenon siphons off US$325 billion a year from state coffers, 6.1% of the region’s Gross Domestic Product. This represents approximately a quarter of these countries’ tax revenueand is an important squeeze on public system funding and wealth redistribution policies. It is not merely a question of cash, but also the volume and quality of the public services we receive and, ultimately, of social cohesion.
Through our work, I have seen first-hand the progress that has been made at a global level in terms of international cooperation in the fight against tax havens, especially in Latin America. Examples of this are the 2018 Punta del Este Declaration, a Latin American initiative designed to maximise the potential of the effective use of the information exchanged under international standards of fiscal transparency, the rules for the Exchange of Information on Request, which allow tax administrations to obtain specific information from counterpart authorities in other jurisdictions and the Automatic Information Exchange, which requires financial institutions to pass on all information that is in their possession regarding financial accounts opened by non-residents to the corresponding tax administration. However, the reluctance of certain countries to adhere to international standards and the fact that some territories have made lax regulation not only a lucrative business, but the very reason for their existence, tend to slow the pace of progress in the fight against tax fraud. This escape route has to be covered through public policies and international cooperation.
At the same time, it is essential to continue to make progress in the application of laws regarding access to public information, which are causing a veritable information revolution. Digitalisation could also have positive implications for tackling this type of crime.bApproval of the framework of the Organization of American States’ Inter-American Model Law 2.0 on Access to Public Information, incorporating state-of-the-art standards, will mark a milestone, as this policy framework is expected to increase the levels of transparency in public management and allow an effective fight against corruption while promoting open competition, investment and economic growth.
Policies, laws and multilateralism are not intended to close the lid on boxes like Pandora’s. Nonetheless, they can mark a channel to limit or shut off access to the unfortunately all-too frequent crimes among mortals such as tax evasion.
Sonsoles Mories, FIIAPP Director of Economic Development and Environment
Sonia González, FIIAPP Coordinator of the EUROsociAL+ Democratic Governance Programme
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