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A trader looks at his screens on the Unicredit Bank trading floor in downtown Milan June 13, 2013. World shares fell and the dollar slumped on Thursday as a sell-off on global financial markets accelerated on concerns over whether central banks will continue the stimulus they have come to rely on. (ALESSANDRO GAROFALO/Reuters)
A trader looks at his screens on the Unicredit Bank trading floor in downtown Milan June 13, 2013. World shares fell and the dollar slumped on Thursday as a sell-off on global financial markets accelerated on concerns over whether central banks will continue the stimulus they have come to rely on. (ALESSANDRO GAROFALO/Reuters)

Little clarity on financial transparency Add to ...

On Syria, on dealing with terrorists, and on financial transparency, the leaders of the Group of Eight found much to agree upon – and much to divide them.

  1. The final communiqué was very similar to one issued a year ago by a UN-Arab League action group, Patrick Martin writes. It reveals that the U.S. government did not get the backing it hoped would give it some cover in arguing for military aid to be sent to the rebel forces.
  2. But, as Geoffrey York writes from Johannesburg, countries often say one thing and do another – so look for politicians to continue to deal with terrorists to save the lives of hostages.
  3. The summit’s host put discussion of tax evasion and rules for financial reporting high on the agenda, but the final agreement lacked details and a timetable, Paul Waldie writes below.

What the G8 said

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As chair of this year’s G8, British Prime Minister David Cameron put tax evasion and financial transparency at the top of the agenda. He hoped to get agreement on a greater exchange of tax information, a registry of the beneficial owners of companies and country by country financial reporting by multinational corporations. All of that was seen as a way of tracking down tax dodgers, rooting out corruption and helping developing countries to find out how much tax corporations are paying, or not paying. It would also take aim at so-called facilitators, lawyers and accountants in developed countries who make corruption and tax evasion possible by setting up shell companies, hiding payments or moving profits.

“This is the agenda which can empower Africa to seize its opportunities,” said Paul Collier, who is director of the Centre for the Study of African Economies at Oxford University and an adviser to Mr. Cameron. “Companies, lawyers and accountants cannot be ethically blind.”

In the end, the G8 communiqué largely left it up to the OECD, an organization of developed nations, to come up with recommendations on automatically sharing tax information. As for the ownership issue, G8 members committed to “collective efforts” but did not go so far as to establish a public registry, something Mr. Cameron favours. Instead, G8 members pledged to develop action plans and hold more conferences. On financial reporting, the G8 vowed to help develop a common reporting standard and work with individual countries in the developing world to improve their audit and reporting systems.

What it didn’t say

There were few details and no deadlines on any of the transparency measures. Key questions left unanswered included: Just how much tax information would be disclosed and how would confidential material be kept private? How would automatic sharing of information work and how would so-called tax havens be forced to sign up? Would China and other non-G8 countries sign up too?

There was also no commitment to make any registry of beneficial ownership public, something many development agencies and African leaders have been calling for.

Canada was also seen by several groups as a holdout on many of the transparency issues, along with the U.S. and Germany. “The G8 communiqué sets an agenda for follow-up, but a lack of agreement by key leaders including President [Barack] Obama, Prime Minister [Stephen] Harper and Chancellor [Angela] Merkel has been covered up by language on action plans and consultations,” said Alex Wilks, campaign director for Avaaz, a London-based non-profit organization.

Canadian officials said they back the overall call for more disclosure, but the federal government needs to work with the provinces.

What it all means

For many non-profit groups, the fact that the G8 even discussed these issues is a breakthrough. They argue Africa loses twice as much from corruption and tax evasion than it receives in development aid. And much of the real work on this issue isn’t being done through the G8 anyway.

The U.S. and European Union have already developed detailed reporting rules requiring companies to report all payments to foreign governments. Canada is following suit.

The mining industry also established the Extractives Industries Transparency Initiative years ago, which requires companies to report all payments to governments, and governments to report the payments they receive. The two figures are then audited independently. That is seen as an effective tool to combat corruption, and so far 39 countries and more than 70 companies have signed on. Many African leaders have praised the EITI and the G8 commended it in its communiqué, urging more countries and companies to sign on.

Most major mining and energy companies are on side with more disclosure rules as well, and they support consistent reporting rules. Some still worry about the administrative cost and whether providing reams of financial information on a country by country basis won’t just add more complexity to the discussion.

Follow on Twitter: @PwaldieGLOBE

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