Tax Law

OECD Praises Itself Through G20 For Progress on Tax Evasion - But Is It Praiseworthy?

In a recent post on its website, the OECD says that the G20 has reported that "steady progress is being made towards tackling tax evasion more effectively."

In an article I wrote in 2010, I called the G20 a syndicator of OECD tax views, since the G20 lacks an independent infrastructure in which to form its own positions on tax policy.  Accordingly, when the OECD points to the G20 pointing to success on an OECD initiative, I interpret that as the OECD praising itself.

In this case the praise is out of step with the general sense I have about where things are with tax evasion today.  There does not seem to be much evidence at all that the OECD is making progress.  The evidence seems to suggest rather that the best that can be said is that some counties that were viewed as extremely tax-evasion friendly a few years ago may be less so today, as a result of the OECD's efforts.  But on the other hand other countries seem to be picking up the slack.  That doesn't seem like progress, that seems like something about deck chairs and a big luxury liner.  As a recent study has shown, there are no fewer dollars in tax havens, a point that seems to work squarely against any notion of progress against tax evasion.

The OECD says "The Global Forum reports that more than 800 cross-border exchange of information agreements have now been signed," and 35 countries have signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters.  What can one possibly make of the attempt to use signed agreements as evidence of progress?  It is a very formalistic way of thinking about things.  "The law exists" is not going to convince anyone that people are in fact following the law, whatever the law may be.  Signing an agreement is not exchanging information.  And I am not even sure that exchanging information is evidence of making progress on tax evasion.  The right information has to be exchanged.  It has to be exchanged in a usable way.  And the information recipient has to have the will and the means to use the information for that purpose.   The commentary I read from non-OECD sources suggests that information is not being exchanged regularly and sufficiently to suggest progress is being made.  Nor do other tools in the anti-evasion toolkit seem to come to the rescue: reports from a recent conference in Helsinki suggest that the OECD itself seems a bit stymied on arm's length transfer pricing, another of its prized weapons against tax evasion.

It is the case that only the competent authorities would know for sure what information they are exchanging under tax treaties and whether they are able to use this information to combat tax evasion.  The competent authorities do not publish any kind of information on this particular data point.  Maybe steady progress is being made.  It would be good to have evidence that it was.  But no amount of prying seems to be opening the door to public access.  We could know so much more about whether progress was being made if we could get some transparency on what the competent authorities do.  But there is a lot of resistance to this form of transparency.


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