Communiqués at multilateral jamborees are often delightfully vague. After reading many pages peppered with solemn expressions, one gets the feeling that the world’s leaders are, finally, together in getting a job done. In reality, that’s rare. Something similar was witnessed at the meeting of finance ministers and central bank governors from the Group of Twenty (G-20) countries in Paris recently.
Apart from subjects requiring immediate attention—the continuing economic crisis being one—the delegates also discussed global illicit financial flows and tax evasion. Indian officials even claimed that, for the first time, G-20 will put its weight behind efforts to obtain information, especially comprehensive exchange of tax information. Given the emotive appeal of “bringing black money back”, this has been claimed as a victory for India’s views.
Finance ministers and central bank governors’ of the group of 20 nations during the family photograph in Paris, France, on 15 October 2011 Photo: Bloomberg
In contrast, the communiqué is quite prosaic. “We underlined in particular the importance of comprehensive tax information exchange and encourage competent authorities to continue their work...to assess and better define the means to improve it.” In fewer, simpler words, all it says is let’s carry on with business as usual.
What has been left unsaid are the country-by-country reporting on illicit flows, disclosing of beneficial ownership—or final gainers from such flows and accounts maintained abroad without disclosing them to tax authorities in the country of their origin—and strengthening of anti-money laundering laws.
In India, to give one example, there is near silence or active evasion of questions on the identity of individuals who have stashed money abroad. The Union government’s efforts at getting such information and releasing it in the public domain have been close to non-existent.
If the government displays some will, there are ways to tackle this menace. The US has, for example, enacted creative legislation. The Stop Tax Haven Abuse Act and Incorporation Transparency and Law Enforcement Assistance Act go a considerable distance in ensuring disclosure of beneficial ownership and country-by-country reporting. Why can’t India frame such legislation? Creating a deterrent legal framework is the first step in curbing illicit flows.
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