Canadians for Tax Fairness: G8 action plan is a step forward on tax havens

The Lough Erne Declaration is clearly a step forward in campaign to curb tax evasion through tax havens.

Ottawa (19 June 2013) – The G8 Summit has issued an action plan on fair taxes, increased transparency and open trade called the Lough Erne Declaration.

Declaration is a good start to curb tax evasion

There are some problems with it. The commitments are hedged a bit and the roadmap for action is vague. But the declaration definitely moves us forward in efforts to curb tax evasion facilitated by tax havens. Here’s the upside:

there is a clear statement of support for automatic tax information exchange, including in devleoping countries
there is a strong language around profit shifting and the need to change tax rules and
it commits to the principle that multinationals should report what tax they pay and where.

Even a year ago, tax justice advocates could only hope that leaders of these powerful countries would pay attention to these issues. And certainly there was no assurance of commitment to automatic information exchange that would include developing countries.

Countries hesitant on most controversial proposals

Unfortunately proposals on beneficial ownership were watered down. Prime Minister Cameron was advocating for a public registry of the beneficial ownership of companies and much stricter enforcement of rules so governments would know who was really behind shell companies and trust accounts. This was clearly the most contentious issue and one where some countries, including Canada, were hesitating.

This issue is key because if tax officials or investigators can’t establish the identity of the ultimate beneficial owner of a company or trust account - then all the other things in the action plan won’t work. How can tax information be automatically shared if you don’t know where the beneficial owner resides? Which government should get the information? This failure means secrecy jurisdictions keep their biggest asset.

The G8 issued a supplementary policy paper on a G8 Action Plan Principles to Prevent the Misuse of Companies and Legal Arrangements that provides more details on proposed strengthening of beneficial ownership rules.

Canada's commitments to crack down on tax evasion are much weaker than the UK, U.S.

Canada also released a document:G-8 Action Plan on Transparency of Corporations and Trusts which commits to:

improving Canada’s money laundering and terrorist financing risk assessment approach, for which an interdepartmental working group has already been established with the goal of developing a comprehensive risk assessment framework and undertaking a formal assessment of these risks domestically
implementing amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations that will improve customer due diligence measures, including those related to corporate and trust beneficial ownership information, set to come into force in early 2014, and
public consultation on the issue of corporate transparency with a focus on bearer shares and the ability of competent authorities to access information on beneficial ownership, as committed to in Economic Action Plan 2013.

While some of these are simply re-announcements of measures outlined in the last federal budget, it contains some positive measures.

Canada still could do better

Canada’s plan, however, is weaker than the British and American plans which were released at the same time. For instance, the British plan commits to a public registry. The U.S. plan commits to pushing state governments with lax rules to tighten up their regulations and to setting up public registries.

Read the Canadians for Tax Fairness full analysis of the G8 meeting.

NUPGE

The National Union of Public and General Employees (NUPGE) is one of Canada's largest labour organizations with over 340,000 members. Our mission is to improve the lives of working families and to build a stronger Canada by ensuring our common wealth is used for the common good. NUPGE