The G8 leaders are expected to announce greater co-operation on tax transparency as well as a move toward more disclosure of corporate ownership when their meeting ends Tuesday.
Both issues are seen as critical to developing countries, particularly in Africa, and leaders from Senegal, Liberia, Ethiopia and the African Union will attend G8 meetings Tuesday at the Lough Erne Resort to press their case.
“This is the agenda which can empower Africa to seize its opportunities,” said Paul Collier, director of the Centre for the Study of African Economies at Oxford University and an adviser to British Prime Minister David Cameron. “This is the part [of the G8] that affects the poorest countries.” He added that by some estimates African countries lose twice as much through tax avoidance and corruption than they receive in foreign aid.
Prof. Collier said G8 leaders are expected to focus on three areas; clamping down on tax avoidance, disclosure of corporate beneficial ownership and country by country financial reporting by multinational corporations. He said tackling beneficial ownership, which would prevent businesses from hiding their true ownership behind shell companies, is “the easiest part of corruption to tackle.” It is a way of “cracking open the secrecy havens”.
He also said the G8 must work with developing nations to give them the expertise to audit companies and force them to pay the taxes that are owed. There is also a need for better rules on the disclosure of land ownership in developing countries, he said. Land deals are often seen as a popular way to launder money because ownership rules in many developing countries are vague and open to abuse.
But there are stumbling blocks at the G8. Canada is believed to be resisting some of the measures, something that has surprised advocates. “We did not expect to see Canada as a holdout,” said Richard Murphy of the Tax Justice Network. He said he believes Canada is being difficult for philosophical reasons, believing that competitive tax systems are important drivers of investment.
Canadian officials at the G8 have insisted Canada supports the transparency agenda. However, they point out that under Canada’s federal system, any rules would have to be agreed to by the provinces.
On Tuesday, Prime Minister Stephen Harper also announced that Canada will draw up an action plan on corporate transparency. The plan includes developing new rules to combat money laundering and “consulting publicly on the issue of corporate transparency.”
Mr. Harper has also earlier said that Canada will adopt rules requiring mining oil and gas companies to report all payments they make to foreign government. But those details too will have to be developed through consultation with the provinces, industry and First Nations. The United States and the European Union have already adopted these reporting standards.
There are other concerns as well. Many large companies worry about inconsistent reporting regimes, something the G8 hopes to address by calling for global standards. And getting countries like China to sign on to more transparency could be difficult, some observers say. But Prof. Collier said it is critical for the G8 to show action.
“The G8 is an important part of the world, the richest part of the world, so if the G8 does not put its own house in order first, it certainly can’t expect others to do so,” said Prof. Collier.
It is also unclear how the automatic exchange of tax information between countries, something many groups have been calling for, will work without confidential material being disclosed. And it is not certain if developed countries will agree to make any new registry of corporate ownership public, something that many groups and African leaders also say is critical.
The G8 discussions come as the OECD released a report Tuesday on tax transparency. In the report the organization, which includes more than 30 developed nations, said “offshore tax evasion is a global issue requiring global solutions – otherwise the issue is simply relocated, rather than resolved.”
The organization outlined several requirements for the automatic exchange of tax information between countries, including the need for a standard legal framework and technical requirements that will ensure confidential information is not disclosed.