'Central Asia and Africa may take place of Switzerland and Singapore as offshore banking havens'
On May 6, 34 members of the Organization for Economic Cooperation and Development (OECD) and 13 other countries signed a groundbreaking agreement on gathering tax-related information from financial institutions and automatically exchanging it every year. The signatories, including Switzerland and Singapore, are aiming at clamping down on banking secrecy and tax evasion.
RT:The era of bank secrecy is over. The 47 states signed an agreement on automatically sharing data, so it’s a big step towards cracking down on tax evasion. What does it mean for the whole world banking sector?
Mike Ingram: It means that the latch is closing in on those who are trying to evade tax. This is the key development that we are seeing today and the OECD head described it as a real danger. I think he might be right. You have Switzerland who signed up to this, this is the world’s largest offshore banking industry. Also Singapore, which was growing very rapidly as well. It not only puts the net on tax evaders but it is also tightens the net on people who tried to follow money illegally perhaps to terrorism as well.
RT:Won't those who've been using bank secrecy for tax evasion or avoidance find a way to bypass this new openness? You know, one door closes, another door opens…
MI: They have signed up 47 countries today [on Thursday], there are more to come. There can be some other countries that are going to look at this opportunistically and say “Hey, we can develop a new financial offshore center overnight which bypasses all these laws.” So yes, it is going to be interesting to see how all of these non-signatories, and there will be some, position themselves in the years ahead.
RT:Which countries can become the new offshores?
MI: There are some countries certainly in Central Asia. It could be also possibly be some centers in Africa. I can’t imagine the more developed nations genuinely are going to do anything other than signing them on. And after all the whole OECD signed up today and that covers a lot of ground. But we are probably beginning to look at areas that are currently considered emerging frontier markets.
RT:How do you explain the timing of this move? Why is it happening now?
MI: It has been an ongoing process, it has been very difficult to get agreement from a number of key countries. And that’s why, for instance, Switzerland signing on to this today was so important because they have really been fighting tooth and nail for many years to let lift the veil off their much treasured banking secrecy. And also it comes on the back of the global financial crisis. It has left a number of economies in a very poor shape. A lot of these countries such as the UK are running sizeable budget deficits, they need all the tax revenue they can, they see that tax bases are being eroded. And of course they want to go after these people to get their tax back onshore to pay the bills.
RT:Why such a transparency is needed today?
MI: Ultimately the lack of transparency doesn’t help the economy, and it is also very socially divisive. You have been in the situation in the past where people who are massively wealthy pay no tax, where people who are working hard and just about scraping by are paying [taxes] at a full rate. And it is very dangerous to democracy, it is very dangerous politically and economically, so the politicians have finally to do something about it.
The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of RT.