Closing down loopholes, G20 targets tax havens

Cook Islands, Vanuatu under scrutiny

Pacific island countries with legitimate tax-haven status like the Cook Islands and Vanuatu risk being isolated and dealt with under new radical plan to force governments and their agencies to reveal details of non-residents hiding stashes of cash in their countries. For years American, Australian and European governments have demanded details from tax haven governments protecting investments made by foreign nationals in what has been estimated to be around US$32 trillion – but with little success as resident governments like Port Vila and Rarotonga have used their long-standing privacy laws to fend off moves to investigate their clients. A recent meeting in Sydney of G20 finance ministers – a powerful lobby group representing world’s largest economies – resolved to adopt a proposal by the Organisation for Economic Cooperation and Development (OECD) for all governments to divulge information on investments by foreigners to the account holder’s home country.

“The political message is we are closing down all the loopholes,” warned Pascal Saint-Amans, OECD director of tax. “What we propose here is to level the playing field to make sure that all countries do this and that all financial centres around the world will exchange this type of information on an automatic basis.” Under an international single model, to be debated and finalised by a second G20 meeting in Cairns in September this year, all government tax offices will automatically be required to divulge information on foreign nationals to the countries concerned. It is expected that sanctions will be imposed on countries like the Cook Islands and Vanuatu if they do not oblige. The new measures will mean all countries obtain information from their financial entities and exchange details with governments of investor origin. “There will only be one single global standard,” said Saint-Amans.

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