Niels Johannesen spoke about information exchange at the Global Forum Meeting
The meeting on 26 November marked the 10th Anniversary of the “Global Forum on Transparency and Exchange of Information for Tax Purposes”. Government representatives from around 130 countries attended the meeting including 60 at the minister level.
Global Forum has decreased tax evasion – but further investigation is needed.
Ten years ago, the G20 Leaders declared “the era of banking secrecy over” and established the Global Forum on Transparency and Exchange of Information for Tax Purposes to ensure global tax transparency.
Switzerland, for example, was once a go-to country for people trying to evade tax paying in their home country. Now, if a Dane travels south to open an account in Switzerland in 2019, procedures of information exchange is automatically initiated to ensure tax compliance.
The Global Forum now counts more than 150 member countries aiming for elimination of bank secrecy through information exchange. An OECD (The Organisation for Economic Co-operation and Development) analysis shows that, in addition to generating significant tax revenues, greater tax transparency also changes taxpayers’ behavior. The automatic exchange of information has led to a sizeable decline in bank deposits in international financial centers over the past decade.
Professor Niels Johannesen has studied tax evasion for almost a decade. He explains: “Global governance has successfully addressed an important policy problem that is waiting to be told. In the U.S, for example, we find a strong increase in the number of tax payers disclosing foreign accounts and reporting foreign income on their tax in the past decade, and we have reason to believe that this is the effect of the tax enforcement.”
Yet, the united effort against tax evasion is still urgent. Tax evasion has huge impact on the global inequality - it is estimated that around 7 trillion U.S Dollars are held in offshore assets. This corresponds to around 10 percent of households’ offshore wealth. And these numbers are notably not declining much over time.
The Global Forum summarizes great measures taken more recently: “…nearly 100 jurisdictions began automatically exchanging information on offshore financial accounts. In 2018 alone, information on more than 47 million financial accounts was exchanged, with a total value of around EUR 4.9 trillion. These developments had significant impact with voluntary disclosure programmes and related compliance activities generating over EUR 100 billion in additional revenue.”
“The OECD analysis shows that the Global Forum has had a sizeable impact on tax revenues on assets. Still, it is important to emphasize that in order to get the full picture of international tax compliance we must study tax returns. So far, the relevant data for further investigation has been locked behind regulated walls only accessible for tax authorities, and thus not for research”, Niels Johannesen argues.